Dell’s weak earnings hurt argument that it’s worth more than buyout offer

February 19, 2013
February 19, 2013

Dell’s earnings dropped more than 30% in the fourth quarter of 2012, taking ammunition away from shareholders who argue the company is worth more than what a proposed buyout of the company is offering. Dell also said it wouldn’t give future outlook for the next quarter or fiscal year because of the $24.4 billion deal to sell the company, which is facing opposition from large outside shareholders. The company also declined to discuss the deal during its earnings call.

Despite the drop in net income and 11% decrease in revenue, Dell’s earnings slightly beat Wall Street estimates, and shares went up a bit in after-market trading. That shows how low expectations were for a company that continues to face falling sales of its computers and laptops for consumers. Revenue for its consumer business fell by 24% to $2.8 billion.

Dell CEO Michael Dell, who is also the company’s largest shareholder, hopes to turn around his company under a private setting away from these quarterly bouts of scrutiny from analysts and investors. He and private equity firm Silver Lake, along with Microsoft, have proposed buying Dell for $13.65 per share, an offer that has been sharply criticized by some Dell investors.

Southeastern Asset Management and T Rowe Price, Dell’s two largest outside shareholders, have vowed to vote against the deal, with Southeastern going as far as saying Dell is worth about $24 a share.

But given where it’s share price has been trading since investor opposition to the deal was publicized—and Dell’s earnings today—shareholders don’t seem to think Dell is worth that much more than the buyout offer price. Dell was trading around $13.84 after hours today.

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