Business

Thursday February 23, 2012

Dell shares fall on earnings miss       


SAN FRANCISCO: Dell Inc forecast fiscal first-quarter revenue below Wall Street's expectations, stoking fears the personal computer (PC) industry has not fully emerged from its downturn and sending the company's shares more than 4% lower.

The world's No. 3 PC maker projected sales would be down 7% this quarter from the previous quarter, when it posted revenue of US$16bil. That translates into about US$14.9bil, below the average forecast for roughly US$15.2bil.

Dell's fiscal fourth-quarter earnings also came in below Wall Street's view as strength in its corporate business unit was offset by the weakness in the division that caters to public businesses.

Chief financial officer Brian Gladden said profit margins for the quarter were hurt by a combination of weakness in US public spending, discounting of the leftover inventory of its previous generation phones and the lingering impact of the Thailand flood on its product mix.

“We just didn't get the mix of drives that we wanted and it really forced us to sell less configured lower-end systems and prevented us from accessing higher margin more highly configured systems,” he said.

Gladden said he expected the hard-disk drive issues to continue this year.

PC makers have grappled with slackening demand as mobile devices such as Apple Inc's iPad erode market share, while a shortage of hard drives after flooding in Thailand crimped supply.

Investors were disappointed by the “lack of the upside in the quarter,” ISI Group analyst Brian Marshall said. “It's going to take a little bit of time for Dell to turn around the tanker ship.”

“They have US$65bil revenue and it takes a long time to move the needle to more strategically relevant revenue sources and we are just not seeing signs of progress yet,” he said.

Dell has been trying to boost profit margins by getting out of low-margin businesses and focussing on being a one-stop-shop for business customers.

Revenue in Dell's fiscal fourth quarter was up 2% at US$16bil, in line with the average analyst estimate of US$15.96bil according to Thomson Reuters.

The company posted a net income slide of 18% to US$764mil, or 43 cents a share, for the period, down from US$927mill, or 48 cents a share, a year earlier. Excluding one-time items, it earned 51 cents a share, a penny below the 52 cents expected.

Dell's large-enterprise business held up well, increasing sales 5% in the quarter to US$4.9bil, as corporations continued to upgrade aging hardware. Reuters

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