Dell Inc. (DELL) Q4 Results to Impact LBO Plan?

Personal computer manufacturer Dell Inc. (NASDAQ:DELL) reported falling sales, revenues and profits for the fourth quarter  ended in January. However, the company’s financial performance bested Wall Street expectations, saving its shares from the kind of brutal battering they endured last November. In fact, the stock has been on a recovery path, gaining nearly 8% in the last three days. This is on top of the massive rally we saw in the shares after founder Michael Dell and private equity firm Silver Lake decided to take the company private.

In its most recent quarter, Dell’s revenue totaled $14.3 billion, down 11% from same period a year ago. It was still better than the $14.1 billion analysts were expecting.

Sales dropped sharply in most categories, including notebooks, desktops, and third-party software and peripherals, with enterprise sales being the only bright spot. Dell’s earnings stood at $530 million in the latest three months, down more than 31% from $764 million in the year-earlier quarter.

Despite these morbid numbers, the stock did not show any signs of selling pressure. What is driving the stock is also interesting, and the private/public debate has a strong bearing on Dell Inc. (NASDAQ:DELL) shares’ movement.

The market is clearly divided into two factions – one with a bearish undercurrent, and another which believes that the company’s stock price provides a far higher discount to its business fundamentals than it deserves. Not long ago, the bear cartel had an upper hand, but things have changed dramatically after Dell’s recent decision to go private in a $24.4 billion deal.

There is little doubt that Dell Inc. (NASDAQ:DELL) still represents immense value; however, it is debatable whether that value is high enough to carry out a buyback. Management certainly feels that a privately held Dell is more valuable than a publicly held one.

The street, till last quarter, believed Dell Inc. (NASDAQ:DELL) was on its way to become another Hewlett-Packard Company (NYSE:HPQ) and thus was stripped of premium valuations. This was logical in view of the rapidly shrinking margins and falling sales. It is not that the world around Dell is crumbling, but the company remains at the receiving end invariably.

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