Dell reported earnings that fell far shy of market expectations on Thursday, but revenue beat forecasts as strength in its enterprise solutions business offset declining PC sales.
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Net income came in at $130 million, or 7 cents per share, down 81 percent from $635 million, or 36 cents per share, a year earlier, as the company's gross margin shrank to 19.5 percent from 21.3 percent and its operating expenses rose 12 percent as it tries to reposition its business.
Dell has been trying to turn itself into a solutions provider in order to offset the declining PC business as consumers move toward mobile devices like smartphones and tablets.
Earnings excluding items were $372 million, or 21 cents per share, down 51 percent from $761 million, or 43 cents per share, in the year-earlier period.
Brian Gladden, Dell's CFO said in a statement, "We have taken actions to improve our competitive position in key areas of the business, especially in end-user computing, and it has affected profitability."
Revenue slipped 2 percent to $14.07 billion from $14.42 billion a year ago. Enterprise solutions sales rose 12 percent to $5.5 billion, while its PC and computing unit saw a 9 percent decline in sales to $8.9 billion.
"The solutions business is where the value is, so it's encouraging to hear that that was growing materially," Morningstar analyst Carr Lanphier told CNBC after the results.
Analysts were expecting Dell to report earnings of 35 cents per share on revenue of $13.50 billion, according to estimates from Thomson Reuters.
Markets were braced for a disappointing number after the company pushed up its earnings announcement three business days.
Dell also said that it will not provide an outlook for the second quarter given its announcement of an agreement to take the company private.
Dell wants to go private in order to more easily focus on turning around its business without the scrutiny that comes with being publicly traded.
While weak results may help bolster Michael Dell's case, the proposal has sparked a battle between founder Michael Dell and a shareholder group led by billionaire investor Carl Icahn and Southeastern Asset Management.
Icahn and Southeastern earlier this month offered $12 in cash per share to investors and they would continue to hold their shares in the company as an alternative to Michael Dell's $24.4 billion bid to take the company private.
Lanphier told CNBC, "We think that Carl Icahn's bid constitutes a superior offer if he can line up the financing and demonstrate that. His offer allows shareholders to both participate in the upside and mitigates the downside with a $12 dividend payout."
Icahn told CNBC last week, "You could look at it real simplistically and not have to do a hell of a lot of work to know that the shareholders in this case are literally getting screwed. You can camouflage it with numbers and whatever, but $13.65 is a giveaway."
(Read More: Icahn: Dell Deal 'Almost Grand Theft')
If shareholders approve Michael Dell's offer, Icahn warned he would nominate his own candidates for Dell's board.
During the first quarter, a number of big hedge funds jumped into Dell, according to regulatory filings. As of the end of the quarter, Highfields Capital Management held 22.87 million shares of Dell, Owl Creek Asset Management held 3.87 million shares, Moore Capital held a 3.25 million shares, and Farallon Capital Management had 2.46 million shares.