Dell Inc., which remains the target of a takeover battle, reported that profits plunged 79 percent in its fiscal first quarter as demand for personal computers continued to decline.
The dismal performance, which was far below analysts’ projections, came as no surprise.
The Round Rock-based company had been scheduled to announce the results on May 21, but on Tuesday Dell Inc. unexpectedly announced it would move the date forward. That raised speculation that the company — which is Central Texas’ largest private employer with 14,000 workers here — would miss its numbers.
For the period ended May 3, Dell Inc. reported net income of $130 million, or 7 cents per share, compared to net income of $635 million, or 36 cents per share, for the same period last year.
Adjusted earnings were $372 million, or 21 cents a share. Revenue declined 2 percent to $14.1 billion.
Analysts polled by Thomson Financial had expected Dell to report a 35 cent per-share profit on sales of $13.5 billion.
“We made progress in building our enterprise solutions capabilities in the first quarter,” said Brian Gladden, Dell’s chief financial officer. “We have taken actions to improve our competitive position in key areas of the business, especially in end-user computing, and it has affected profitability.”
The earnings report came as the company is considering a buyout deal led by founder and CEO Michael Dell and other investors for $24.4 billion, or $13.65 a share. Two of Dell’s biggest shareholders, billionaire Carl Icahn and Southeastern Asset Management, have made an alternate proposal in an attempt to block that deal.
Michael Dell didn’t participate in Thursday’s earnings conference call, which could be the company’s last if his bid to take Dell Inc. private is successful.
Analysts said the latest poor financial results could bolster the effort led by Michael Dell, who wants to expand the company’s software and services offerings while being free of the scrutiny that comes with being a public company.
Dell’s revenue in its PC division dropped 9 percent in the latest quarter, while revenue in the software and services segment grew 12 percent from a year ago.
“This is exactly why Michael Dell wants to go private,” said analyst Patrick Moorhead of Moor Insights & Strategy. “It would allow them to be more aggressive on pricing with commodity markets like PCs and servers, and allow them to keep investing in higher value activities like software and services.”
Moorhead said the poor performance “helps bring to life what (Michael) Dell has been saying about where the company needs to go. It will help some people get over the hump of whether Dell should go private or not.”
Icahn and Southeastern Asset Management said last week that they want to keep Dell publicly traded and are proposing new leadership and additional cash or stock for shareholders.
A shareholder vote is supposed to be held by Aug. 2.
Officials said the company would not provide a financial outlook because of the ongoing buy-out situation.
Financial results were announced after markets closed on Thursday. Dell Inc.’s stock ended the day at $13.43, down 2 cents or .15 percent, and shares stayed flat in after-hours trading.