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February 20, 2013

Dell Beats Analyst Forecasts But Continues to Post Declining Sales

By Erin Harrison, Executive Editor, Cloud Computing

After posting a 31-percent decline in profit for the fourth quarter, Wall Street analysts are speculating that Dell’s (News - Alert) latest earnings report could fuel backlash from investors seeking to hike the offer price of the world’s third largest PC maker –set to go private pending a $24.4-billion buyout.

Posting another quarter of declining sales and profits, Q4 revenue was $14.3 billion, an 11-percent decrease from the previous year, and a 4-percent increase sequentially.

Revenue for the 2013 fiscal year was $56.9 billion – an 8-percent decrease.

An analyst from IDC (News - Alert) said that the upshot of this quarter’s earnings report is subject to investor interpretation, as a positive earnings report was expected to add more fuel to the fire for investors seeking to hike the offer price.

“A lot of this depends on how the market will interpret the quarter and determine if there’s material upside to the deal,” IDC analyst Crawford Del Prete told USA Today.

Company officials said given the company’s announcement Feb. 5 of a “definitive merger agreement” to take Dell private, the company is not providing an outlook for its fiscal 2014 or Q1.

Highlighting what few positive glimmers remained for the fourth quarter, Dell CFO Brian Gladden said Dell had a 6-percent increase in its enterprise solutions and services business.

“We also continued to generate strong cash flow from operations of $1.4 billion in the quarter,” Gladden said in a statement. “Our strong balance sheet and cash position enabled the company to invest almost $5 billion in new capabilities and intellectual property this fiscal year, including great assets like Quest, SonicWall, Wyse and AppAssure.”

Given the size and wealth of the company, the Dell buyout would become “the largest leveraged buyout since the global financial crisis,” the Business Insider reported.

News reports predict Michael Dell would become majority owner of the company. He is leading the buyout consortium with Silver Lake Partners, according to Reuters (News - Alert). Michael Dell was absent from the Feb. 19 earnings call.

Insider Monkey prophesized that if Dell performed well, it would “only bolster the opposition’s case that Silver Lake is trying to take advantage of a short-term decline in the stock to grab the company at a bargain.”

“If it does badly, though, shareholders may well grasp at the opportunity to get out while the getting’s good.”

If the buyout deal goes through, it will take the PC maker off the stock market after 25 years.

Edited by Braden Becker
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