The company just reported less than stellar financial results, with earnings below analyst estimates for the first time in eight years. Management blamed most of the problems on its sales force not being able to close enough deals during the quarter.
In the past, the company has been able to overcome revenue and earnings shortfalls, and returned value to shareholders by repurchasing its own stock, reducing share count by a third, and increasing its dividend payouts.
International Business Machines Corp. (NYSE:IBM) probably can’t get out of the current rut by financial engineering alone. It may need to address the flaws in their sales process.
Dell deal
Blackstone’s bid was in competition with several others, including a team that includes company founder Michael Dell.
Another player is the iconic investor Carl Icahn, who would like to add Dell to his list of conquests. He may be the right one for the job of improving things at Dell based upon his track record with other companies.
The Apple Inc. (NASDAQ:AAPL) effect
The world’s second most valuable company, Apple Inc. (NASDAQ:AAPL), wasn’t immune to the drop-off in PC shipments. According to IDC estimates, the company sold 7.5% fewer Macs in the January to March period, but still held onto thirr place in the U.S. market.
Apple Inc. (NASDAQ:AAPL) is seeing its market share for iPhones and iPads being eroded and its once lofty margins are declining. The turmoil has caused a 47 % drop in the stock price since the latest model of the iPhone was released last September.
One would have thought that the trouble in the PC market would allow a company like Apple to excel because of its previously dominant position in mobile computing, especially in the tablet industry which the company helped grow exponentially after the introduction of the iPad in 2010.
That hasn’t happened as competitors such as Samsung have made inroads into the smartphone business. The latest Samsung device, the Galaxy S4 (that was designed to cut into Apple’s lead in the high-end of the market), is being rolled out this month.
Apple is fighting back with the planned release of a lower-priced iPhone and the next generation of the original iPhone later this year which will address both half’s of the market.
Apple just posted its fiscal second quarter results. It beat analyst estimates on both earnings and revenue. Also, the company indicated it will return more of its cash pile to shareholders, announcing a dividend increase and more stock buybacks. Maybe things are finally turning the corner in Cupertino.
Conclusion
It remains to be seen who will be the “winner” in the bid to take Dell private.
Will Dell be forced out of the PC business and have to diversify like IBM did? If Carl Icahn takes over it is a strong possibility. If Michael Dell comes out on top it may be business as usual and things will continue to spiral downward.
Whoever has the best insight into those questions might benefit by making the right investments.
The article Why Blackstone Said No to Dell originally appeared on Fool.com and is written by Mark Morelli.
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