Dell profit slides 72 percent as privatisation battle drags on

Dell reported a 72 percent drop in profit on Thursday, a month before an expected shareholder vote that could shape the future of the company.

Dell is in the midst of a battle between founder and CEO Michael Dell, who wants to take Dell private, and a group of discontented shareholders who say he must pay more money in order to do so.

Michael Dell and his investment partner increased their offer slightly last month, to about US$24.7 billion, and on Sept. 12 Dell's shareholders are due to vote on whether to accept the proposal. The opponents, led by investor Carl Icahn, still want more money, and it's unclear if the privatization plan will go through.

In the meantime, Dell is fighting to improve its financial performance against the backdrop of a declining PC market, a lackluster economy and uncertainty about its future.



On Thursday it reported revenue for its second quarter, ended Aug. 2, of $14.5 billion, about level with the same quarter last year. Net income declined 72 percent to $204 million.

Sales in its PC business fell 5 percent to $9.1 billion, Dell said. But operating profits from that group declined more steeply, by 71 percent, as Dell cut prices to win business and grow its market share.

"Our efforts to improve growth have improved our share position at the expense of profitability," CFO Brian Gladden said in a letter to investors.

Results were better in its Enterprise Solutions Group, which sells servers, storage and network gear, where revenue was up 8 percent to $3.3 billion, Dell said. Services revenue was also up slightly, to $2.1 billion.

Using nonstandard accounting methods, which excludes certain costs and charges, Dell reported a profit of $433 million for the quarter, or $0.25 per share. On that basis, profits were in line with analysts' expectations, according to Thomson Reuters.

Dell's expenses in the quarter also included $125 million related to the privatization effort, the integration of acquisitions and layoffs, the company said.

Dell released the results a few days ahead of schedule, because of the "heightened interest in the company," spokesman David Frink said. It opted to forgo the usual conference call with financial analysts, publishing instead a letter from its CFO and other materials.

Michael Dell announced his plan to take Dell private back in February. He's trying to grow the data center side of Dell's business, which is more profitable than the PC side, and says he can do it more effectively if Dell is private, away from the scrutiny of Wall Street.

Foxconn's Hon Hai net profit up 41 percent in Q2

Foxconn's Hon Hai Precision Industry reported a strong gain in net profit during the second quarter, but revenue growth for the Apple supplier continued to remain weak.

Hon Hai's net profit in the quarter reached NT$16.9 billion (US$564 million), up 40.8 percent from NT$12 billion in the same period a year ago, the company reported on Tuesday.

Revenue, however, increased year-over-year by only 0.4 percent, putting it at NT$895.6 billion.

Hon Hai is the main manufacturing arm for Taiwan-based Foxconn Technology Group and builds products for major tech vendors including Amazon, Microsoft and Nintendo. Apple, however, is the company's most important customer and makes up about 40 percent of Hon Hai's revenue, according to analysts.

In this year's first quarter, Hon Hai posted a 19.2 percent year-over-year decrease in revenue. Some analysts have attributed the decline to weak demand for Apple's iPhone 5 product.

Hon Hai's reported financials on Tuesday did not go into detail about the business conditions behind its results. But in June, Foxconn CEO Terry Gou apologized to company shareholders for Hon Hai's falling stock price. At the time, news reports had emerged that Hon Hai had also lost manufacturing orders for Apple's rumored budget iPhone to rival Taiwan-based Pegatron. Gou declined to name Pegatron, but said his company's competitors were using low prices on manufacturing to grab orders.

A budget Apple iPhone is rumored to go on sale later this year, alongside with the new iPhone 5S.

Despite its declining revenue, Foxconn is working to expand its manufacturing and research. Last month, Gou made a high-profile visit to the Chinese city of Guiyang, where his company plans to establish a new manufacturing facility that could build products for the nation's electronics market. Foxconn already has over 1.2 million workers in China.

The company is also investing in researching robotics to better automate its factory assembly lines. In addition, Foxconn wants to hire 3,000 software engineers in Taiwan to help the company make Mozilla's Firefox OS a viable mobile OS competitor.

British Film Institute Funding Cut by 10 Percent for 2015-2016

LONDON – The British Film Institute has fallen victim to a 10 percent cut in funding for 2015-16 as part of the British government's move to cut spending across all departments.

The funding cut was handed down by the Department for Culture, Media and Sport.

The BFI has reacted with consternation and some surprise, noting the cut comes on the back of previous reductions amounting to 18 percent over the last two years.

In the last two years, the BFI also has absorbed the activities of the dissolved U.K. Film Council.

"As a national cultural body which is also the catalyst for the growth of the film industry, we are shocked that film has not been protected alongside the U.K.’s other national arts bodies and museums," the BFI said in a statement. "This is even more surprising given the Government and industry’s endorsement of the BFI’s five-year strategic plan for film, launched less than a year ago [October 2012]."

The BFI notes that the government secretary of state’s (Maria Miller) statement on the DCMS website recognizes the "huge contribution" made by the organizations she is protecting with a 5 percent cut.

"But her decision not to include the BFI fails to acknowledge film’s multibillion-pound [dollar] contribution to the economy, and instead puts film in the position of effectively subsidizing other arts organizations," the BFI said.

The BFI also argues that while the tax credit system in place for the movies, TV and gaming industries is to be applauded, there should be no reduction in investment in film support.

"This is extremely disappointing and worrying for the film sector and audiences at a point where it is clear to those in and out of government that film is playing an active and significant role in the U.K.’s economic recovery and is a vital contributor to our cultural life and international profile," the BFI said.

The movie organization said that because of the 10 percent cut in funding, it can no longer consider expanding its activities.

"We are in urgent discussions with the minister with a set of proposals to mitigate some of the impact of these cuts. If these proposals aren’t achievable then the BFI will have no choice but to stop valuable frontline activities and reduce support for partner organizations."

The DCMS letter says its budget will reduce by $94 million (£62 million) in real terms in 2015-16, a 7 percent reduction to the resource budget. In addition, there will be a 5 percent reduction to the core capital budget.

In real terms, the BFI is looking at a cut of approximately $3.8 million (£2.5 million) if using 2013 as a base year.

During 2013, the BFI's total resource cash allocation is projected to be $34.6 million (£22.8 million) from the soon-to-cut grant in aid only and including $1.5 million (£1 million) for its film academy and $6.1 million (£4 million) earmarked for Northern Ireland.