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Dell’s profit collapses by 72 percent in recent quarter

Dell’s double digit profit collapse shows nobody is safe from the declining PC market. 


As Dell finds itself as the centerpiece of a battle between two groups competing to take it over, it finished its most recent quarter with an almost catastrophic collapse in profit.

Dell finished its most recent quarter with a 72 percent drop in quarterly earnings. Net income fell to $204 million for the quarter, compared to $702 million a year earlier. One bright side in Dell’s earnings report was the enterprise solutions, services and software business division, which saw sales climb by 9 percent.

In many ways this market trend plays into Michael Dell’s $25 billion plan to restructure the company into one more focused on offering enterprise services. Michael Dell, backed by Silver Silver Lake Management LLC, and Dell Inc. say they have come to an agreement, but Dell’s shareholders have yet to vote on the plan and one potential roadblock stands in the way: Carl Icahn.

Icahn, known for his shareholder activism, says the Silver Lake-Dell deal for Dell Inc doesn’t put enough cash on the table for shareholders. Icahn has a lawsuit in the works to block the takeover deal, which has to be ratified by shareholders at a meeting in September.

Regardless of which way the Icahn-Dell lawsuit goes, unless Dell quickly transforms itself into a enterprise solutions centric company, much like IBM did in the mid-2000s, the company will fade away into obscurity. It already tried its hand at making tablets and other gadgets to middling success, but these didn’t bring in enough revenue to replace what was lost with falling PC sales. Without transformation, be it as a private company or remaining as a public entity, Dell will have a long and protracted death. Something needs to happen fast.

Source: Reuters

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