Dell’s Tough Q1 Could Help CEO’s Buyout Efforts

By Jeffrey Burt  |  Posted 2013-05-17 Print this article Print

Still, the PC business is hurting, and the trend worldwide is downward. According to IDC analysts, PC shipments globally fell 14 percent in the first quarter.

Dell is trying to reduce its dependency on PC sales. Since Michael Dell returned to the CEO seat in 2007, the company has spent billions of dollars buying companies in hopes of boosting its capabilities in a wide range of enterprise IT areas, from networking and storage to security, software and services. Dell’s enterprise solutions business saw revenues grow 10 percent over the same period last year, to $3.1 billion, while operating income jumped 71 percent, to $136 million.

A problem is that the issues around the PC business are making this transformation difficult, according to Krista Macomber, an analyst with Technology Business Research.

“The bottom line indicates that Dell has had to cut prices and rapidly increase investment in acquisitions, sales efforts and new technologies just to maintain the top line, notably due to declining demand in the PC industry,” Macomber wrote in a May 16 research note. “This suggests that the company will not be able to achieve sustainable corporate revenue or profit momentum as it remains in its period of reinvention to an end-to-end solutions provider during the remainder of 2013.”

That could play into shareholders’ decisions on the future of the company, particularly now that they could be offered two significantly different proposals to choose from. Both Michael Dell and Carl Icahn say they are optimistic about Dell’s ability to recover, and both are confident in the strategy of focusing on enterprise IT solutions as the key to any turnaround.

However, while there are differences around the amount of money involved, whether to take the company completely private and how much debt to take on, there also is another place where the proposals deviate: if Michael Dell’s bid is accepted, he remains CEO. Icahn already has said that if his group take control of the company, Michael Dell will be out.


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