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Dell posts 72 per cent slump in second-quarter profit

The dismal quarterly performance may give a fillip to Michael dell’s buy-out offer.

The US-based PC maker Dell has reported a 72 per cent slump in second-quarter earnings as a result of downward spiral in PC sales. Surprisingly, this announcement comes nearly a week before it was initially slated and a day before the court will hear investors’ arguments against Michael Dell’s proposal to take the firm private.

The firm posted a net income of $204m for the second-quarter ended 2 August 2013, compared to $732m for the same period last year.

Overall, the net revenue remained flat at $14.51bn, while operating income declined by 70 per cent to $272m.

The company’s PC sales continue to decline during the quarter, as most of the customers preferred to buy laptops and tablets over desktops. Last month, research firms Gartner and IDC have reported that global PC shipments declined by 11 per cent in the second-quarter of 2013.

Division wise, the company’s enterprise solutions group grew by 8 per cent to $3.3bn, while revenue of Dell Services unit increased by 2 per cent to $2.1bn.

During the quarter, the company’s end user computing division contributed revenue of $9.1bn, while software division brought in revenue of $310m.

Brian Gladden, CFO of Dell, said: "In a challenging environment, we remain committed to our strategy and our customers, and we’re encouraged by increasing customer interest in our end-to-end solutions offerings and continued growth in our Enterprise Solutions, Services and Software businesses."

The company, which didn’t reveale outlook for the third-quarter, is currently in the process of buy-out. Activist investor Carl Icahn, and the company’s founder Michael Dell along with Southeastern Asset Management are in the fray to acquire the company.

Founder and CEO Michael Dell proposed a $25bn buyout to take the firm private, but activist  investor Icahn has opposed saying that this offer is too low.

Now with the dismal quarterly performance, the CEO's offer of $13.75 per share and an additional 13-cent dividend may get a fillip.

In the recent times, Dell has had to reduce prices in order to allay the concerns of enterprise clients, who have been wary of going for about long-term contracts with a firm entangled in a complex restructuring.

Currently, the enterprise computing market already has well established players like HP and IBM and Dell intends to benefit from this growing segment.

The company’s annual general meeting of shareholders is scheduled on 17 October 2013.