Dell Will Report Earnings Early as Icahn Ramps Up Pressure
Dell, in the midst of a bitter custody battle that will help decide its future, will announce quarterly financial numbers five days earlier than scheduled, a move reportedly made because of anticipated poor results.
Dell officials announced May 14 that they will announce earnings numbers May 16, rather than the scheduled date of May 21. They did not cite a reason why they made the move, though various reports indicate that Dell executives expect to miss Wall Street estimates and wanted to get the news out as soon as possible.
The Wall Street Journal, citing an unnamed source who had been briefed on the results, said Dell will report $14 billion in revenues for the first three months of the year, which is higher than the $13.5 billion expected by financial analysts. However, operating income will come in at about $600 million, below forecasts, the Journal reported.
Dell for several years has been hit by the fallout of a slowing global PC market—due in large part to the growing popularity of smartphones and tablets—and the rise of cloud computing, both trends that have hit the company's traditional hardware. Dell officials are working to transform the company into an enterprise IT solutions and services provider, spending billions of dollars to buy vendors in hopes of building up its capabilities in such areas as storage, networking, software and the cloud.
In hopes of accelerating that difficult transformation—and to get away from the Wall Street scrutiny of the company's finances—founder, Chairman and CEO Michael Dell and equity firm Silver Lake Partners in February announced a $24.4 billion bid to buy the world's third-largest PC maker in a leveraged buyout and take it private.
The $13.65-per-share offer has been met with vocal opposition from some large investors who believe the bid undervalues the company and would benefit only Michael Dell at the expense of shareholders. Some investors have said they will vote against it, with a few threatening a proxy fight.
Adding to the mix is a competing proposal from activist investor Carl Icahn and Southeastern Asset Management—which combined own about 13 percent of outstanding shares in the company—to buy the company and oust Michael Dell. The two sent their proposal to the Dell board of directors May 9, and on May 14 listed a slate of 12 directors whom they want to see on the board.
Included on the list sent to the Securities and Exchange Commission is Icahn himself, as well as two executives who work for him—Daniel Ninivaggi, who is CEO of Icahn Enterprises, and Jonathan Christodoro, managing director of Icahn Capital.
How the new financial numbers will impact any proposals for the company remains to be seen. However, in the May 9 letter to directors, Icahn and G. Staley Cates, president and chief investment officer at Southeastern, called Michael Dell's offer a "giveaway" and criticized the board for going along with it. They urged the board to either declare their offer superior to Michael Dell's or let shareholders vote on each offer.
Under the proposal from Icahn and Southeastern, investors could either get a $12-per-share cash dividend or receive $12 in additional shares for $1.65 a share. They would finance the proposal using available Dell cash and about $5.2 billion in new debt.
Dell directors said they needed more information from Icahn and Southeastern, including a draft definitive agreement outlining their proposal, more information on the financing for the bid, and who would be on Dell's senior management team and what their strategy for the company would be.