Saturday 24 March 2018

Dell shares slump after Q2 forecast falls short of expectations

Aaron Ricadela

SHARES in Dell tumbled the most in more than three years after the computer company forecast fiscal second-quarter revenue that missed analysts' estimates.

Revenue for the period ending in July will be $14.7bn to $15bn (€12bn), Texas-based Dell said in a statement. Analysts had been expecting an average of $15.4bn.

The forecast, paired with a first-quarter sales and earnings miss, pointed to problems endemic to Dell, Steve Felice, Dell's president, said in a conference call.

The sales team focused on individual products instead of packages of hardware and software, he said. A re-organisation is under way aimed at lining up staff who can sell a complement of Dell products, instead of specialising in individual ones.

"In my own interactions with larger customers, we are seeing a delay and pause in spending activity," chief executive Michael Dell said during a call with analysts.

PC sales

PC sales will remain sluggish because businesses won't move immediately to Microsoft's Windows 8 operating system when it's introduced later this year.

"Corporations are still adopting Windows 7."

Shares slumped 15pc in early-day trading in New York, the biggest intraday decline since November 2008. The stock had climbed 3.1pc this year before yesterday's slump.

Demand for Apple's iPhone and iPad and other mobile devices are eating into Dell's notebook sales. The world's third-largest personal computer maker lost share in the global PC market in the first three months of the year, according to market researcher Gartner.

"They're focused on profitability," said Shaw Wu, an analyst at Sterne Agee & Leach in San Francisco.

"That's a double-edged sword. Sure it can help your margins somewhat, but you're also shrinking your installed base."

While Dell didn't change its earnings-per-share forecast for the year, chief financial officer Brian Gladden told analysts on the call there was "clearly pressure on the total year outlook".

To diversify beyond PCs, Dell is selling more of its own data-storage and networking gear.

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