Dell Goes Private to Reinvent Itself

Gartner’s worldwide PC shipment report for the final quarter of last year showed that PC shipments fell 4.9% over the year to 90.3 million units; the decrease was driven by increasing adoption of tablets. PC shipments in the U.S. fell 2.1% over the year to 17.5 million units in the quarter. The EMEA region did not fare any better, as PC shipments fell 10% to 28.1 million units, and shipments in Asia Pacific fell 1.8% to 29.9 million units. Gartner believes that the decline in computer sales was accelerated by the availability of low-cost tablets during the previous year. PC sales refused to pick up during the holiday season as consumers preferred to give tablets instead of PCs as gifts. Earlier, analysts were hopeful that the launch of Microsoft’s Windows 8 would help drive growth in PC shipments. However, the muted reaction received to the new OS did not do much good for the industry.

Dell’s Financials
Declining PC sales continued to impact the future of Dell (NASDAQ:Dell). Dell’s Q4 revenues fell 11% to $14.3 billion during the quarter, while managing to surpass market expectations of $14.1 billion. EPS of $0.40 was also ahead of the Street’s targets of $0.39.

By segment, revenues from large enterprises fell 7% over the year to $4.7 billion, and revenues from public segment fell 9% to $3.5 billion. The small and medium business segment declined 5% over the year to $3.4 billion, and declining PC sales impacted sales from the consumer business, where revenues fell 24.0% to $2.8 billion.

Analysts project that Dell’s revenues for fiscal 2014 will fall 1.3% over the year to $56 billion and that earnings will decline 2% to $1.68 per share.

Dell’s Software Focus
As part of Dell’s aim to migrate away from the hardware segment into software sales, they recently acquired Credant Technologies, a provider of data protection solutions, for an undisclosed sum. Credant’s solutions help organizations control, manage, and secure data sent from endpoints to servers, storage, and the cloud. Their offerings include a simplified security management solution that is delivered through a single console that caters to multiple devices, including PCs, tablets, external media, mobile devices, and public clouds. Through the acquisition, Dell will be able to expand their security portfolio for their end customers.

Last quarter, Dell also announced the acquisition of Gale Technologies, an infrastructure automation company, again for an undisclosed sum. Privately held Gale Technologies provides infrastructure automation software that helps organizations manage their computing, storage, and networking resources. With Gale’s products, organizations are able to turn discrete components into integrated and optimized application and virtual desktop infrastructure. Dell will leverage the acquisition to sell converged infrastructure technologies marketed through their new group, Enterprise Systems & Solutions.

Dell Goes Private
Despite Dell’s strong moves, the biggest news of late has been the company’s announcement to become a private company. Earlier this month, Dell announced plans to be bought over by founder Michael Dell in conjunction with technology investment firm Silver Lake in a transaction valuing the company at $24.4 billion. As part of the sale, Dell stockholders will receive $13.65 for each share of Dell common stock. Dell maintains that the sale of their stock will not impact the focus on growth. They believe that by moving away from the constantly analyzing eyes of the Wall Street, they will be able to take the steps needed to regain lost ground.

Some believe that Dell has underpriced the deal. For now, Dell’s stock is trading near 52-week highs of $13.81, with a market capitalization of $24.02 billion.