Dell profits drop 72 per cent amid buyout row

Dell reported a 72 per cent drop in earnings in its Q2 2013 financial report, with the PC maker heavily engaged in a takeover row.

Although earnings per share were slightly ahead of expectations at $0.25 (£0.16) and sales stand at $14.5 billion (£9.3 billion), Dell’s net profits fell 72 per cent from the figures recorded for the same quarter in 2012.

PC sales amounted to $9.5 million (£6.1 million), dropping 5 per cent from last year.

“In a challenging environment, we remain committed to our strategy and our customers”, said Brian Gladden, Dell CFO.

Currently the world’s third largest PC manufacturer, Dell was originally held up as a model of product-chain innovation, but has been resorting to price cuts to shift units. It was also late to enter the enterprise computing market, which hasn’t helped the company’s figures either.

“It was predictably bad. It’s not a big surprise that margins compressed to the degree that they did, when they’re prioritising sales volume over profitability,” said Carr Lanphier, Morningstar analyst. “You have to offset that uncertainly somehow.”

Michael Dell, the company’s founding CEO and activist investor Carl Icahn are currently engaged in a heated row over the future of the company. Dell is proposing to make the company private with a $25 million buyout plan, but Icahn, a leading shareholder, believes that price tag is too low.

The Q2 financial report figures may well back up Dell’s argument that a $13.75 per share offer, plus a 13 per cent dividend is more than ample for the company to go private.

“They can’t compete on a level playing field when you have a wrestling match over the future of the company,” added Lanphier.

The fight between Icahn and Dell will be moved to the courtroom in the coming weeks, with a shareholder vote on the plan taking place September 12.

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