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Dell’s Ownership Battles Continue as Asia Pacific Presence Expands

Posted on Thursday, Aug 29th 2013

IDC’s recent quarterly PC shipment report reveals that the market fell 11.4% over the year to 75.6 million units as tablets continue to eat into the market share. During the quarter, Lenovo surpassed HP to become the market leader with 12.62 million units, or 16.7% market share. HP came in a close second with 12.38 million units or 16.4% market share. Dell maintained its position in the third spot with 9.23 million units, commanding 12.2% market share and recording a decline of 4.2% over the year. There was some good news for Dell, which saw shipments in the U.S. grow 3.8%, the first time it grew since 2011. Other regions did not show much promise.
Dell’s Financials
Dell’s Q2 revenues remained flat over the year to $14.5 billion, while managing to surpass market expectations of $14.18 billion. EPS of $0.25 was marginally better than the Street’s targeted earnings of $0.24 for the quarter. Total net income was down 72% over the year owing to the sluggish PC sales and continued price cuts being offered by Dell to increase sales.

Declining PC sales have dealt a heavy blow to Dell, which still gets nearly half its revenues from this market. By segment, End User Computing fell 5% over the year to $9.1 billion, with revenues from laptops recording a 10% decline. Enterprise Solutions Group revenues grew 8% to $3.3 billion attributed to the 10% growth in server and networking revenues and 19.0% growth in their networking revenues which helped offset the 7% decrease in storage revenues. Dell Services revenues grew 2% over the year to $2.1 billion.

Dell’s Asia Pacific Focus
Dell continued to grow its presence within the enterprise segment and recently expanded those offerings in  Asia Pacific. Dell released comprehensive end-to-end solutions to offer entrepreneurs and organizations in the region access to their data servers and laptop related services.

Within servers, they upgraded their S-series portfolio with the features such as industry’s highest-density switching platform for virtualized data centers that consume less power while delivering doubles the density and throughput. The server features advanced virtualization and automation to help with larger scale virtual deployments. They also released the PowerEdge T20 Server in the region to focus on small offices and home offices.

Within laptops, Dell released Dell Latitude 7000 Series to be made available to companies in the Asia Pacific region. These award-winning laptops are known to offer increased security, manageability, reliability, and quality.

Dells’s Ownership Battles
Meanwhile, Dell continued to deal with ownership issues as investors sought out the best possible deal for the company’s future. Earlier this year, Dell had announced a $25 billion LBO plan to become private. But, another investor in the organization, Carl Icahn and Southeastern Asset Management, are convinced that Dell can get a better offer than the one put up by founder, Michael Dell and Silver Lake Partners.

Icahn recently sued the board of Dell for having accepted a higher buyout offer from Michael Dell in exchange for modifying the rules governing the vote for the deal. Dell’s fate will be decided on September 12th when their shareholders are scheduled to vote on the deal.

Things are not going to improve soon for Dell. Not only does it have to deal with ownership issues, but the PC market is not expected to grow soon. According to CLSA, worldwide PC sales are projected to fall 7% this year and 4.5% in 2014.  Meanwhile, Dell’s stock is trading at $13.77 with a market capitalization of $24.20 billion. It touched a 52-week high of $14.64 in March 2012.

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