--Dell earnings drop 79%, below analyst expectations
--Dell admits some customers are concerned about company's
future
--Revenue at computing segment falls 9%
(Adds details from conference call.)
By Ian Sherr, Shira Ovide and Nathalie Tadena
Dell Inc.'s (DELL) fiscal first-quarter earnings dropped 79%,
missing Wall Street expectations, as the computer maker reported
weaker revenue in its computing segment.
The quarter marks Dell's sixth straight period of year-over-year
profit declines amid an industry-wide slump in PC sales as tablets
and smartphones become more popular devices.
The report, which was pushed up three business days, comes as
founder and Chief Executive Michael Dell is seeking to take the
company private in a $24.4 billion deal. The company has said it
can more easily make the necessary changes to turn itself around
without the scrutiny and limitations of being a public company.
However, the $13.65-a-share deal from Silver Lake Partners and
Mr. Dell has raised the ire of some shareholders, including Dell's
largest outside shareholder Southeastern Asset Management Inc. and
activist investor Carl Icahn. Last week. Southeastern and Mr. Icahn
proposed an alternate offer.
Dell, meanwhile, said earlier this week that it would accelerate
the earnings report without disclosing a reason.
Dell Chief Financial Officer Brian Gladden said the company took
"actions to improve our competitive position in key areas of the
business," particularly in the sharply declining PC market. The
company's action "has affected profitability," Mr. Gladden added.
Dell's operating expenses increased 12% in the quarter, and its
gross margin narrowed to 19.5% from 21.3%.
On a conference call with analysts, Mr. Gladden faced a barrage
of questions about pricing discounts Dell recently undertook, as
well as questions about the PC market's long-term viability. Mr.
Gladden also admitted some customers were jittery as a result of
the company's plan to go private.
"Clearly, there is a chance to spend more time with customers,"
he said.
Dell shares slipped 3 cents to $13.40 in after-hours
trading.
In recent years, Dell has looked to move away from its reliance
on PCs, building out a portfolio of products and services that it
can sell to businesses. Those include security software, storage
systems and networking gear, which usually have higher profit
margins than PCs. But PCs still make up more than half of the
company's revenue, complicating the company's efforts to
meaningfully diversify its business.
Revenue from the company's end-user computing segment fell 9.3%.
Within that segment, desktop and thin-client revenue declined 1.9%,
and mobility revenue dropped 16%. Enterprise solutions revenue
increased 9.8%, while services revenue improved 1.7%. The company's
software unit had revenue of $295 million, resulting in an
operating loss. The company recently realigned its operating
segments.
Overall, Dell reported a profit of $130 million, or 7 cents a
share, for the quarter ended May 3, down from $635 million, or 36
cents a share, a year earlier. Excluding amortization, severance
and acquisition-related charges and other items, per-share earnings
fell to 21 cents from 43 cents. Revenue slipped 2.4% to $14.07
billion.
The results were in line with those estimated Tuesday by The
Wall Street Journal, which cited a person briefed on the results.
Meanwhile, analysts polled by Thomson Reuters had projected a
per-share profit of 35 cents and revenue of $13.5 billion.
Write to Ian Sherr at ian.sherr@dowjones.com, Shira Ovide at
shira.ovide@wsj.com and Nathalie Tadena at
nathalie.tadena@dowjones.com
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