Tomahawk, WI 8/16/2013 (Basicsmedia) – Dell Inc (NASDAQ:DELL) has been making waves one way or the other for some time now and by the looks of it, doesn’t want to dam the current. It’s been hemming and hawing over the Michael Dell issue and its investors are not making life easy for the company either. PC sales are heading for the depths of the abyss and no matter which way it turns; it seems to be meeting a dead-end.

The Q2 fire

The company’s latest earnings report just added fuel to the raging fire that seems to be engulfing the computer maker. DELL reported its Q2 results that italicize the storms it is weathering at the moment. Net income for the financial Q2 plummeted 72% to $204M or 12 cents/share, from the $732M or 42 cents that it stood at a year earlier. On an average, analysts had projected a profit of $275M.

From one perspective, the abysmal dip in earnings buttresses Michael Dell and Silver Lake Management’s case that the company’s shareholders should vote in favor of their buyout proposal. Dell and all PC manufacturers have been nicked badly by the sag in PC shipments but the burgeoning demand for networking gear and servers have help boost sales.

Submerge or emerge?

PC shipments have slumped for 5 consecutive quarters and the near future does not seem to have fewer craters. The company did exceed low-expectations but the y-o-y comparisons are not very propitious. The PC market continues to flow along at below sea-levels and this is one factor that might just be the fulcrum that will help turn Michael Dell’s luck around.

At Thursday’s close, DELL shares were trading at $13.71 and are currently at $13.70 in the pre-market. This is a notch below the Dell and Silver Lake offer of $13.75/share. It is a strong indicator that shareholders might just buckle and back the buyout. This month, the Dell board had accepted the nectarous offer that had been proffered by the founder. The revenue of the Q2 that ended 2 August was almost planed at $14.4B in contrast to the analysts’ average estimation of $14.2B.

Pliable rules

Michael Dell and Silver Lake Management have put forth an offer of a 13 cents /share dividend in addition to the already marked-up $13.75/share carrot they had dangled in front of the shareholders. The finial was that shareholders would also receive an 8 cents/share Q3 dividend irrespective of the closure date. Dell investors who hold stock as of 13 August will qualify to vote on this buyout.

The meeting is slated for 12 September. What is a must-mention at this point is that the Dell board had turned very tactile and molded company voting rules like putty. Now, abstentions will not be counted to be “not for” the deal.

The founder and the flounder

Adding some spice to the buyout saga is Carl Icahn who is on a tangent of his own. Today, he will be asking a Delaware court to put on afterburners on his lawsuit against Dell Inc. He has been haranguing for almost a month now and wants to thwart Michael Dell’s disputable $24.8B offer to buyout DELL. Icahn’s crusher is that he should be permitted to appoint directors for the company. In his opinion this is the only way that Dell can stay public. Not to mention that he will rake in the dollars from his stake as well.

At the moment, I feel like I’m viewing the Dell Inc (NASDAQ:DELL) kaleidoscope. A slight twist of the wrist and almost-psychedelic colors and patterns form before my eyes. Dell, fighting for control of a company he founded, a board that’s confounded, an activist investor who is grounded and investors who are as lost as babies in the woods.


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