Earnings Preview: Dell 1Q results could sway deal
ROUND ROCK, Texas (AP) — Dell's latest quarterly results are expected to illuminate the personal computer's deepening slump as the company's board of directors tries to convince shareholders to accept a $24.4 billion buyout offer from CEO Michael Dell and a group of investors.
WHAT TO WATCH FOR: The numbers, due out Thursday after the stock market closes, are getting released ahead of schedule. Dell Inc. had originally planned to post its fiscal first-quarter earnings May 21, but rescheduled the report earlier this week without any explanation.
The mysterious switch spurred speculation that Dell missed the analyst projections that influence how investors react to quarterly reports. Wall Street forecasts a 19 percent decrease in Dell's adjusted earnings from last year and a 6 percent dip in revenue
This a rare instance when Dell's board probably wouldn't mind if the downturn is even worse than analysts anticipate. That's because the board might have an easier time make its case for the proposed sale to Michael Dell and his allies if the company's outlook is even bleaker.
The Dell board contends shareholders should be pleased to get $13.65 per share at a time when PC sales are crumbling, as more people and businesses buy smartphones and tablets.
WHY IT MATTERS: Michael Dell thinks he can turn things around by pushing the Round Rock, Texas, company into more profitable technology niches beyond PCs.
But he believes that he can better execute his strategy while re-aligning the business as a privately held company, so he doesn't have to deal with external pressures and distractions from Wall Street, which grows increasingly patient if profits aren't steadily rising.
The buyout would end Dell's 25-year history as a publicly traded company.
Two of Dell's biggest shareholders, billionaire Carl Icahn and Southeastern Asset Management, have made an alternate proposal in an attempt to block the sale to Michael Dell. Icahn and Southeastern contend existing shareholders should be given an opportunity to reap the gains from a turnaround. Their proposal would give shareholders the option of retaining a stake in Dell as a publicly held company.
Icahn and Southeastern believe so strongly in their plan that they are mounting an effort to oust the 12-member board that's backing the company's sale to Michael Dell and replace it with directors who would support their alternative.
WHAT'S EXPECTED: Analysts surveyed by FactSet are predicting Dell will post adjusted earnings of 35 cents per share on revenue of $13.5 billion.
LAST YEAR'S QUARTER: Dell reported net income of $635 million, or 36 cents per share. Excluding one-time charges, Dell said it earned 43 cents per share, on revenue of $14.42 billion.