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THE WALL STREET JOURNAL.
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EARNINGS | May 14, 2013, 1:32 p.m.
ET
Dell to Miss Profit
Estimates, Beat on Revenue |
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Dell Inc. pushed up the timing for releasing its quarterly profits,
which the company expects to be far worse than Wall Street had expected,
according to a person briefed on the results.
Signs of further deterioration in
the computer maker's profits could help bolster the $24.4 billion effort to
take the company private, in a deal led by private-equity firm Silver Lake
Partners and
Michael Dell, the company's founder and chief executive. The buyout has
faced opposition from some of Dell's largest stockholders.
Mr.
Dell and other buyout proponents have said the company should be taken out
of the hands of public shareholders, because they will continue to punish
Dell's stock for reporting ugly financial results while it evolves from a
PC-and-server company to a provider of broader corporate technology and
services.
The
Round Rock, Texas, company had previously set a date of May 21 to report its
fiscal-first-quarter results. On Tuesday, Dell said it was accelerating the
announcement to this Thursday but didn't explain why.
Dell
now expects to report revenue of roughly $14 billion, and earnings of 20
cents a share, excluding some expenses, according to the person briefed on
the financial results.
The average of analyst estimates
had called for Dell to post $13.5 billion in revenue, and earnings of 35
cents a share, excluding some items, according to
FactSet Research Systems Inc.
This
person also said Dell expects to report operating income of about $600
million, below average analyst forecasts.
Brian Marshall, an analyst with ISI Group, said the results indicate Dell
sacrificed profit by reducing prices to help move PCs, servers and other
products in the last three months.
"Clearly there's been discounting by everybody, not just Dell," Mr. Marshall
said. "Maybe [Dell] had too much success selling discounted products."
But the timing of the accelerated
financial report comes as two buyout opponents have sharply criticized
Dell's board for accepting what they say is a cut-rate buyout offer. The
opponents, investor
Carl Icahn and Southeastern Asset Management Inc., are pushing to derail
the Dell buyout with an alternative stockholder plan greeted with skepticism
by the Dell board.
Mr.
Icahn didn't return a call seeking comment. A spokesman for Southeastern
declined to comment.
Some
buyout opponents worry Dell's continued lackluster financial results reflect
purposeful choices to make the company appear weak, and allow Mr. Dell to
buy out his company on the cheap. Those buyout skeptics could seize on the
latest financial results as further evidence for these theories.
Mr.
Icahn and Southeastern last week proposed a deal to let Dell stockholders
retain some of their shares, and take a $12-a-share dividend in cash or Dell
stock.
A
special committee of the Dell board, in a harsh rebuttal to the duo's offer,
said Monday it would consider the overture only if the two parties came
forward with firm financing, a new Dell management team and a litany of
details not included in their initial proposal.
As
Mr. Icahn in particular has sought to whip up opposition to the Dell buyout,
the company's share price has crept closer toward the $13.65-a-share offer
from Silver Lake and Mr. Dell—in a sign some traders may be expecting a
higher deal price from the Silver Lake group or other potential buyers.
On
Tuesday, shares dropped 5 cents to $13.47.
—Ian Sherr contributed to
this article.
Write to Shira
Ovide at shira.ovide@wsj.com
A
version of this article appeared May 15, 2013, on page B4 in the U.S.
edition of The Wall Street Journal, with the headline: Dell's Profit Will
Miss Estimates.
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