Dell Warns Sales Hurt by Europe
By Nicole Volpe
NEW YORK (Reuters) - Dell Computer Corp. (NasdaqNM:DELL - news), the world's No. 2 personal computer maker, said on Wednesday its third-quarter sales could be about 3 percent below what it expected due to weak demand in Europe, knocking the one-time ''must own'' stock further off its pedestal.
Dell, which also cited slow sales to small-business customers, said profits were on track for the third quarter, but fourth-quarter earnings per share could be one to two cents below Wall Street analyst targets.
``There has been some macro-psychology at play with the weak euro,'' said Chairman and Chief Executive Michael Dell, speaking to analysts at a meeting in Austin, Texas. ``People (in Europe) have been significantly less inclined to make expenditures in terms of technology.''
The company issued the warning after the close of trading on Nasdaq. Shares fell $3-3/16, or more than 11 percent, to $25 in after-hours trade after closing down 3/8 at $28-3/16 during regular session trading on Wednesday -- lows the once high-flying stock has not seen in two years.
``You have to ask yourself it can go any lower,'' said SG Cowen analyst Richard Chu. ``They've got to start making their numbers immediately.''
Dell said that if the softness persists into the fourth quarter, full-year revenue would be about $32 billion, an increase of about $7 billion, or 27 percent, from sales for fiscal 2000.
The company has previously said it expected to deliver 30 percent sales growth for the full year, well off its historic growth rates of above 50 percent that had made Dell a magic stock for investors as the No. 1 performing S&P 500 stock of the 1990s.
Chip giant Intel Corp. (NasdaqNM:INTC - news) and stylish personal computer maker Apple Computer Inc. (NasdaqNM:AAPL - news) both said recently they saw slack sales in the region. The Dell trouble dashed hopes that those warnings were due to isolated company issues.
``When Apple warns, well that's not really a bellwether,'' said Anne Bui, analyst with market research firm International Data Corp, referring to the offbeat computer maker. ``But when I think of Dell, I think corporate, and I think that it could extend across segments.''
Roughly two-thirds of Dell's worldwide revenues come from corporate sales.
She added that the warning called into question September International Data Corp. forecasts for 14.5 percent PC unit sales growth in the third quarter, up from a 7.2 percent growth rate in the second quarter.
``We revisit our forecasts every three months and we take into account all of these things,'' she said.
``This growth rate they are expecting now is about half of the 50-plus growth rates they were known to deliver,'' Bui said.
The profit consensus among Wall Street analysts was for Dell to report earnings for the fourth quarter ending January 2001 of 28 cents per share compared with 15 cents in the January 2000 quarter, according to a survey by First Call/Thomson Financial.
The third-quarter consensus estimate was 25 cents per share compared with 18 cents per share from the same period a year ago.
The Round Rock, Texas-based computer maker said its profit margins remained firm, benefiting from lower-than-expected component costs which have allowed the company to make price cuts across its product lines.
``The question is, what will happen next year in (fiscal) 2002?'' asked Chu. ``They left that wide open so there's a lot of uncertainty.''
Dell made the comments during the first day of its two-day fall conference for analysts and money managers. |
