Dell’s profit and revenue both declined amid a collapse in PC sales.
Dell has reported another quarter of declining revenue and profit as the company’s CEO continues his battle to take the PC maker private.
It was the fifth consecutive quarter in which Dell’s profits shrank, and the fourth in which it reported declining revenue. The company has been hit by a downturn in the PC market.
Revenue for its fourth fiscal quarter, ended Feb. 1, declined 11 percent to US$14.3 billion, Dell said. Net income was $530 million, down 31 percent from a year earlier, while earnings were $0.30 a share, down 30 percent.
Revenue from desktop and laptop PCs, which account for about half Dell’s business, declined 20 percent in the quarter. Sales from storage and services also fell from the year earlier. The only business unit to see growth was Dell’s server and networking business, where sales were up 18 percent, Dell said.
Dell has been trying to reduce its dependence on PCs and refashion itself as a complete “solutions” company, one that sells higher-margin software and services as well as PCs and servers. But the transformation has been taking longer than investors would like.
Earlier this month, Michael Dell announced a plan to team up with Silver Lake and take his company private in a $24.4. billion deal. The move could allow the company founder to focus on longer-term investments, away from the constant scrutiny of Wall Street.
However, the plan has run into opposition from big shareholders, who think the $13.65 per share that the buyout group is offering doesn’t reflect the value of the company. One big investor, Donald Yacktman of Yacktman Asset Management, has said the chances of the deal going through at its current valuation are “close to zero.”
Michael Dell was absent from the company’s earnings call Tuesday, and a Dell spokesman said the other executives on the call, who included CFO Brian Gladden, would not be taking any questions about Dell going private.
The quarterly profit figures reported above include one-time charges and other items. Excluding those items, Dell reported a profit of $0.40 per share for the quarter, a penny ahead of the consensus analyst forecast, according to a poll by Thomson Reuters.
There were a few bright points. Sales of network gear were up 42 percent, including a doubling of Dell’s Force10 business, and sales of cloud security services also increased, Gladden said. The 5 percent increase in server sales was helped by strong growth in “hyperscale” servers, the machines Dell sells to large online service providers.
Dell gained $250 million during the quarter from what it obliquely referred to as “vendor settlements.” A spokesman declined to elaborate on the nature of those settlements. Several big computer-display manufacturers have been fined recently for price fixing, and it’s possible Dell benefited from payments related to those cases.
Dell used some of the settlement money to essentially subsidize PC prices for some of its bigger customers, with the hope that those “investments,” as Gladden called them, would help it retain those customers and lead to sales of more profitable gear in the future.
There is intense price pressure in the PC market, and Dell has said it will try to resist selling very low-cost PCs in order to keep its profitability up. That hurt it in the consumer market, where the growth is currently in “value” PCs and in tablets – another market where Dell is not strong. As a result, revenue in its consumer PC business was down 24 percent.
Dell is still holding out for a big corporate PC refresh cycle in which businesses will complete their upgrades to Windows 7. Dell estimates that some 40 percent of corporate PCs are still running Windows XP or Windows Vista, Gladden said.
for more information where Total Soft Tech Solutions Inc. gets its news.
visit link below: