Dell, the PC maker embroiled in a takeover battle between its founding CEO and activist investor Carl Icahn, on Thursday reported a 72% slide in quarterly earnings as PC sales extended their downward spiral.
Dell, which once led the world in computer sales and was held up as a model of production-chain innovation, is increasingly resorting to price cuts to soothe customers nervous about its future and to spearhead a late foray into the enterprise computing market.
“It was predictably bad. It's not a big surprise that margins compressed to the degree that they did, when they're prioritising sales volume over profitability,” Morningstar analyst Carr Lanphier said. “You have to offset that uncertainty somehow.”
Dell is the subject of a bitter contest over its future, with founder and CEO Michael Dell proposing a $25-billion buyout to take the PC maker private, and Icahn leading shareholder opposition on the basis that the offer is too cheap.
The dismal results could shore up the CEO's argument that his $13.75-a-share offer, plus a 13-cent dividend, is a fair price for the world's No.3 PC maker, which needs to undergo a serious overhaul out of the public investor spotlight.
Analysts say Dell has had to aggressively cut prices to win over enterprise customers nervous about long-term contracts with a company in the middle of a complicated restructuring, and must compete in enterprise services with better-established rivals like Hewlett-Packard and IBM.
Some have speculated that Dell, which has spent some $13 billion in acquisitions since 2008 to expand into storage, software and networking, may reverse direction and unload assets as it continues to restructure the organisation.
“They can't compete on a level playing field when you have a wrestling match over the future of the company,” Lanphier said.
Shares of the firm dropped 2 cents to $13.68 in after-hours trade, following a brief rise.
The company in recent years has become one of the more prominent victims of PC market erosion from mobile devices, such as Apple’s iPad. Sales from Dell's end-user computing division, which incorporates computers, slid 5% to $9.1 billion.