Dell’s profit dives

Monday, 20 May 2013 00:00 - - {{hitsCtrl.values.hits}}

(Reuters): Dell Inc, the subject of a takeover battle between activist investor Carl Icahn and the company’s billionaire founder, reported a 79% slide in profit as personal computer sales continued to shrink.

The disappointing results lend weight to Michael Dell’s effort. The man who started Dell from a college dorm room wants to take the world’s No.3 PC maker private for US$ 24.4 billion, arguing that its transformation into a provider of enterprise computing services, from mainly a computer maker in a shrinking market, is best done away from public scrutiny.

Reflecting that shift in focus, Dell said that revenue from enterprise solutions, services and software jumped 12% to US$ 5.5 billion, while overall revenue slipped 2%. Its “end-user computing division,” linked to PC sales, slid 9%. To augment its enterprise business and go head-to-head with more established players like International Business Machines Corp and Hewlett-Packard Co, Dell is investing heavily on research and sales to retain customers.

Icahn and major stakeholder Southeastern Asset Management, however, dismiss Michael Dell’s go-private deal as too cheap for a company trying to become a major provider of enterprise computing. They are proposing new leadership and additional cash or stock for shareholders. Icahn’s and Michael Dell’s battle over what direction to take the company underscores the uncertainty in the PC industry, which enjoyed more than a decade of roaring growth until the advent of smartphones and tablets ended that era.

Now, the company that had been upheld as a model of innovation as recently as the early 2000s is steadily ceding ground to lower-cost Asian rivals and mobile hardware makers like Apple Inc.