) delivered fourth-quarter 2013 earnings of 40 cents per share,
ahead of the Zacks Consensus Estimate by a penny.
The company reported revenues of $14.3 billion in the reported
quarter, down 10.7% year over year. The decline in revenues was
due to lower contributions from all the business segments and
Revenue by Segments
posted revenue of $4.7 billion, down 7.0% year over year. Within
the large enterprise, server and networking revenue moved up
25.0% and Enterprise Server & Storage business moved up
was $3.5 billion, down 9.0% year over year. The company continues
to witness a slump in the U.S. Federal business. Moreover, a
challenging spending environment in the U.S. federal business
coupled with some uncertainty in the budgetary and IT spends
affects this system.
Small and Medium Business
revenue was down 5.0% to $3.4 billion. The SMB segment was mainly
affected by the reduction in the order renewal rate.
revenue plummeted 24.0% to $2.8 billion.
Gross margin in the reported quarter was 21.7% up from 21.1%
in the year-ago quarter.
Operating income for the quarter was $698.0 million or 4.9% of
revenues in the reported quarter, down 25.0% year over year, hurt
by lower rate of reduction in expenses than revenue.
GAAP earnings in the quarter were 30 cents per share compared
with 43 cents a share in the year-ago quarter. Excluding special
items like amortization of intangibles, severance and facility
consolidation cost, acquisition-related costs, as well as income
tax adjustments, earnings per share in the quarter came in at 40
cents versus 51 cents in the year-ago quarter.
Balance Sheet & Cash Flow
The company exited the quarter with cash and cash equivalents
of $12.6 billion, up from $11.0 billion reported in the previous
quarter. The company generated cash flow from operations of $1.4
billion, down from $1.8 billion reported in the previous
As the company is looking forward to a pending merger agreement /
LBO, so the management has not provided an outlook for fiscal
Dell to Go Private
recently announced its decision to go private in a leveraged
buyout agreement (LBO). Founder Michael Dell will acquire the
company at a purchase consideration of roughly $24.4 billion,
much higher than the market expectation of $23.0 billion. Dell's
shareholders will be rewarded with $13.65 per share in cash. The
transaction is likely to be completed by the second quarter of
The idea behind the privatization is to stay away from public
scrutiny and expectations and better focus on business growth and
profitability. However, Dell's dependence on the PC market
remains the main problem.
In addition, Dell lacks a firm footing in the servers, storage
and cloud computing space, which is unfavorable in comparison to
), and to some extent,
). Another competitor,
) is dominating the tablet space.
Dell reported modest fourth-quarter results with earnings per
share exceeding the Zacks Consensus Estimate, but revenues and
operating income taking a massive hit. Revenues across the entire
business segment declined annually.
The major issue faced by the company is the cannibalization of
the PC/notebook business. Moreover, the company is facing tough
challenges due to cutthroat competition, low business growth in
Europe and restricted spending environment. Some analysts also
expect further declines in PC shipments.
Moreover, the competition faced by the company in the SMB and
server segments as well as a downturn in the European economy is
also a concern.
The stock carries a Zacks Rank #4 (Sell).
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