Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Dell’s Depressing Proxy Makes Analysts Cringe

commodus_thumbs_downWhile computing company Dell may be seeking to go private, for the moment it is still publicly held. In the wake of Friday’s 274-page proxy filing that painted a depressing picture about the company’s struggles to turn around, one analyst, Steve Milunovich of UBS, has slashed his expectation for Dell’s earnings for the fiscal year.

Writing in a research note issued to clients today, Milunovich reduced his forecast on Dell’s per-share earnings by 40 cents to $1.30, but left his “neutral” rating on the stock intact. “The proxy shows a financial plan for F2014 with lower profit than we and the Street currently model due to PC pricing pressure and required investments,” he wrote. “We … project a down year in F15 based on continued growth in. We underestimated the investments needed to become an enterprise player.”

Prior to announcing its $24.4 billion buyout plan in which Michael Dell and private equity firm Silver Lake Partners, with $2 billion in loans from Microsoft, are seeking to buy out Dell shareholders at a price of $13.65, the company’s plan had been to diversify its business away from personal computers and embrace enterprise IT, including servers, storage, services and software. Acquisitions, among them Quest Software, Compellent, Wyse Technologies and others, haven’t injected the sort of growth initially expected, Milunovich writes.

“Based on Mr. Dell’s plans, profit could be down in fiscal year 2015 even on higher revenue if the company prices aggressively in PCs and continues to invest in enterprise computing at the rate he appears to propose,” Milunovich writes. “Whether Dell would be as aggressive a spender if it stays public remains to be seen.”

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