Ahead of the Bell: Dell details challenges in 1Q
Analyst: Dell's weak quarterly results may make buyout offer an easier sell for PC maker
Dell Inc.'s weak first quarter likely made it "a bit easier" for the slumping PC maker to convince shareholders to accept a buyout offer from founder and CEO Michael Dell, to a Brean Capital analyst.
Michael Dell and other investors have offered to buy Dell for $24.4 billion, or $13.65 per share. Some shareholders say that price is too low.
Dell and other PC makers have struggled with slumping sales in response to the growing popularity of smartphones and tablets. Dell said Thursday it earned $130 million, or 7 cents per share, in the latest quarter, compared with $635 million, or 36 cents per share, a year earlier. Adjusted earnings of 21 cents per share fell below Wall Street expectations, and the company's revenue dipped 2 percent to $14.1 billion.
Brean's Ananda Baruah said in a Friday morning research note he expects the company's stock to trade near $13.65. Company shares slipped 5 cents to $13.38 Friday before markets opened.
Consumers are spending their money on powerful, more convenient mobile devices like the phones and tablets instead of buying faster computers every few years. Nearly two-thirds of Dell's revenue still comes from PC sales, and demand has weakened, particularly with laptops, even though companies have slashed prices on their products.
And the company's management on Thursday "seemed to suggest" that the PC business will not improve, Baruah said.
A vote on Michael Dell's $24.4 billion buyout is supposed to be held by Aug. 2, and the company's board of directors is trying to persuade shareholders the offer is a good deal considering the company's challenges.
But two of Dell's largest shareholders, billionaire Carl Icahn and Southeastern Asset Management, are trying to block the sale with an alternative proposal that would keep the company publicly traded.
Both Michael Dell and the dissident shareholders believe the company can bounce back in part by expanding beyond PCs into more promising technology segments such as business software and services.
