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Dell second quarter profits drop off a cliff

Profits sink 72 percent due to a takeover battle and a dwindling PC market
Fri Aug 16 2013, 14:10

TIN BOX FLOGGER Dell has posted dismal financial results for its fiscal second quarter of 2014, reporting a sharp decline in profits as it suffers from a flagging PC market and a battle to take the company private.

The firm's profit in the second quarter was $204m, down from $732m in the same period last year, a drop of more than 72 percent.

Dell's revenues rose slightly from $14.483bn in the second quarter of fiscal 2013 to $14.514bn in the same quarter this year, an increase of just 0.21 percent. This was due to growth in non-PC areas of the business, with the Enterprise Solutions Group posting an eight percent increase in revenue to $3.3bn and Dell Services up two percent to $2.1bn.

Dell's End User Computing business unit saw revenue of $9.1bn, down five percent on the same quarter in fiscal 2013. Dell said that desktop and thin client revenue increased one percent, mobility revenue declined 10 percent, and revenue from software from third parties and peripherals dropped by five percent.

Though the figures offer some hope for the firm as it tries to grow from a PC maker into an IT enterprise vendor, the decline in profits comes amid an ongoing battle to take the company private. On 5 February the firm's founder Michael Dell announced a bid to buy the company along with private equity firm Silver Lake Partners, with additional financing from Microsoft.

By going private, the group hopes Dell can rebuild the company away from the prying eyes of investors and market watchers. However, they have encountered strong resistance from rival Carl Icahn who believes they have undervalued the company, which has led to an ongoing battle for control.

Dell CFO Brian Gladden admitted that the huge slump for the quarter underlined the difficulties facing the firm, but said there are opportunities ahead.

"In a challenging environment, we remain committed to our strategy and our customers, and we're encouraged by increasing customer interest in our end-to-end solutions offerings and continued growth in our Enterprise Solutions, Services and Software businesses," he said.

The dwindling PC market is also a contributing factor to Dell's falling profits. Last week, analyst outfit Gartner reported a 19.8 percent drop in PC shipments over the last year in Western Europe and a 13 percent decline in the UK.

Dell also saw declines in PC shipments across both European and British markets, with the firm seeing declines in shipments of 1.1 percent in Europe and 1.2 percent in the UK.

Gartner said the declines were attributable to manufacturers waiting for Intel to release its fourth generation Haswell chip before launching new products. µ


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