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Dell results disappoint Street, shares dive

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05/23/2012 | 12:34am CET

Dell Inc forecast disappointing second-quarter revenue as U.S. and European corporate tech spending weakens and consumer personal computer sales continue to shrink, hammering its shares.

Shares in the company, which like rival Hewlett-Packard Co is losing market share to mobile devices such as Apple Inc's iPad, dived more than 11 percent in after hours trade.

The world's No. 3 PC maker forecast a 2 to 4 percent revenue gain this fiscal quarter, to $14.7 billion to $15 billion, well short of the $15.4 billion Wall Street had been expecting.

"Clearly we are seeing a bit more challenging demand environment," Dell Chief Financial Officer Brian Gladden said in an interview. "Europe, in general, was down for us."

Demand from U.S. federal businesses appears to be improving slightly, he noted. "We are seeing a pretty good pipeline there."

Dell's quarterly revenue fell more than analysts had expected, hurt by weak sales to consumers, large enterprises and government units. PC makers have struggled with slowing demand as mobile devices such as the iPad erode market share.

Brian Marshall, an analyst with ISI Group, said the "real poor results" shows that it will take Dell more time to transform itself from a PC company to a one-stop shop for all the information technology needs of corporations.

"It clearly is disappointing," Shaw Wu, an analyst with Sterne Agee, said. "The expectations heading into the quarter were not even that high."

CONSUMER SALES SLOW DOWN

Dell's sales to consumers took a big hit, with consumer revenue slipping 12 percent to $3 billion. Sales to large corporations declined 3 percent to $4.4 billion.

Dell said revenue in its fiscal first quarter declined 4 percent to $14.4 billion, below the average analyst estimate of $14.9 billion according to Thomson Reuters I/B/E/S.

Excluding one-time items, the company earned 43 cents, less than the average Wall Street estimate of 46 cents.

Net income fell to $635 million, or 36 cents a share, from $945 million, or 49 cents a share, a year earlier.

Gross margins for the quarter came in at 21.3 percent.

"April was not what we expected," Gladden told analysts on a conference call, but he added that the "pipelines look pretty good."

Dell's shares traded at $13.20 after hours, down from a $15.08 close on Nasdaq.

Dell's poor showing comes a day before larger rival HP reports its quarterly earnings. Shares in the No. 1 PC maker, which sources say plans to lay off more than 25,000 employees globally as it tries to revive its business, edged down 2.5 percent to $21.24 from a close of $21.78 on the New York Stock Exchange.

HP is merging its PC and printing divisions to shore up margins in the personal computing business.

(Reporting By Poornima Gupta; Editing by Richard Chang)

By Poornima Gupta

Stocks treated in this article : Apple Inc., Dell Inc., Hewlett-Packard Company
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Financials ($)
Sales 2017 47 385 M
EBIT 2017 3 795 M
Net income 2017 2 584 M
Finance 2017 205 M
Yield 2017 3,50%
P/E ratio 2017 10,87
P/E ratio 2018 10,47
EV / Sales 2017 0,57x
EV / Sales 2018 0,57x
Capitalization 27 391 M
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Consensus 
Mean consensus OUTPERFORM
Number of Analysts 25
Average target price 16,6 $
Spread / Average Target 2,4%
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Managers
NameTitle
Dion J. Weisler President, Chief Executive Officer & Director
Margaret C. Whitman Chairman
Jon E. Flaxman Chief Operating Officer
Catherine A. Lesjak Chief Financial Officer & Executive Vice President
Shane D. Wall Chief Technology Officer
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