It is becoming harder to believe that a turnaround of Dell will be anything but messy â€" and shareholders may not want to stick around for that part.
A new report released on Wednesday by the International Data Corporation appears to bolster the company’s argument for going private, noting a steep drop in global personal computer sales in the first quarter this year.
The carnage was clear nearly across the board, with sales in the United States dropping 12.7 percent from the quarter a year earlier. Quarterly shipments reached their lowest level since 2006. Virtually all major computer makers have scrambled to cope with falling unit prices and the rise of tablets and smartphones as attractive alternatives to traditional desktops and laptops.
The bloodshed was especially noticeable at Dell, where global shipments contracted more than 10 percent worldwide and 14 percent in the United States. With its shipment of nine million units, the company claimed 11.8 percent of the overall market, again falling behind Hewlett-Packard and Lenovo.
I.D.C. attributed Dell’s problems to continued competition from an array of rivals and customer uncertainty over the company’s future path.
The report mirrors a trend Dell itself documented in its proxy statement last month. The thick document noted repeated instances of the company failing to meet its own projected financial targets for seven quarters.
Dell’s internal revenue estimates for the 2014 fiscal year fell to as low as $56 billion from $66 billion.
PC sales, according to the proxy, still account for more than half of Dell’s revenue despite a number of takeovers meant to bolster the size of its corporate services arm.
In presentations to the board explaining his rationale for what became a $24.4 billion take-private offer, company founder Michael S. Dell said that the necessary fixes would hammer the stock even more.
“Mr. Dell stated his belief that such initiatives, if undertaken as a public company, would be poorly received by the stock market because they would reduce near-term profitability, raise operating expenses and capital expenditures, and involve significant risk,†Dell disclosed in its proxy.
Still, shareholders like Southeastern Asset Management have argued that Mr. Dell’s bid is a lowball offer, citing a belief that the worst of the turnaround is over. Southeastern in particular has supported tentative rival bids from the Blackstone Group and Carl C. Icahn that would allow investors to hold onto a piece of the company through what’s known as a public stub.
Proponents of that deal structure may be heartened by I.D.C.’s noting that the company slowed its overall decline in shipments from previous quarters and achieved some growth in sales within the Asia region, excluding Japan.
I.D.C. itself appears more pessimistic about the overall prospects for the business of selling computers, however.
“Although the reduction in shipments was not a surprise, the magnitude of the contraction is both surprising and worrisome,†David Daoud, I.D.C.’s research director for personal computing, said in a statement. “Vendors will have to revisit their organizational structures and go to market strategies, as well as their supply chain, distribution, and product portfolios in the face of shrinking demand and looming consolidation.â€
