Dell Second-Quarter Profit Falls Short of Estimates
By Melita Marie Garza
Aug. 28 (Bloomberg) -- Dell Inc., the world's second-largest personal-computer maker, posted a profit that trailed analysts' projections and said a slowdown in technology spending is expanding into Europe and Asia. The stock fell 8.6 percent.
Second-quarter net income fell 17 percent to $616 million, or 31 cents a share, from $746 million, or 33 cents, a year earlier, Dell said today in a statement. That missed the 36-cent average of estimates compiled by Bloomberg. Sales for the period ended Aug. 1 advanced 11 percent to $16.4 billion.
Dell said it sees ``continued conservatism'' in U.S. spending, and that it has spread to Western Europe and some Asian countries. Profit margins also were hurt by attempts to win customers in Europe, the Middle East and Asia, the company said.
``People are reacting to that miss, especially since they beat by 2 cents last quarter,'' Cowen & Co. analyst Louis Miscioscia said in an interview from Boston. He expects Dell's shares to out perform its peers, and said he doesn't own any.
Excluding some costs, profit was 33 cents, also short of the average analyst projection.
Dell, based in Round Rock, Texas, fell $2.18 to $23.03 in extended trading. The shares dropped 42 cents to $25.21 by 4 p.m. New York time in Nasdaq Stock Market trading. The shares have gained 38 percent since mid-April.
Sales to commercial clients in Asia advanced 16 percent to $2.05 billion, slower than the 19 percent growth in the first quarter. Sales to corporate customers in Europe, the Middle East and Africa advanced 11 percent to $3.5 billion, short of the 15 percent increase in the previous period.
New Customers
Chief Executive Officer Michael Dell is targeting more clients in countries such as India and China as growth slows in the U.S., where about 75 percent of adults already own PCs. The company, which has trailed Hewlett-Packard Co. in shipments for eight straight quarters, also is building machines in lower-cost countries to keep expenses down.
Since taking back the top job last year, Dell has begun selling through retailers, adding more than 13,000 in at least 24 countries and enlisting resellers abroad. Dell, 43, had built up his PC business over the past two decades by selling machines mainly over the phone and the Web. Dell also has focused more on design to win consumers, introducing wedge-shaped models in hues such as Spring Green and Ruby Red.
To save money, Dell is limiting the degree to which buyers can dictate specifications, instead expanding its line of prepackaged models.
U.S. Buyers
About three-quarters of the U.S. population owns a computer, according to IDC. That compares with about 5.1 percent in India and 9 percent in China, the Framingham, Massachusetts-based researcher said.
For corporate customers, Dell has introduced machines with longer battery life, flying to India this month to show off the biggest upgrade to the company's business line in six years. The company's share of the Indian PC market has more than doubled in the past two years, to 7.6 percent as of the end of the first quarter. That compares with 18.4 percent for Hewlett-Packard.
Yesterday Dell also debuted a line of laptops, called Vostro, aimed at smaller companies in developing countries. The machines are cheaper because they include free software and less technology.
Hewlett-Packard controlled 18.9 percent of the global PC market last quarter, according to IDC. Dell's share climbed to 16.4 percent in the period.
Dell also has shown growth in other product lines, including servers, which accounted for 11 percent of its revenue last fiscal year. Servers are computers used to run corporate Web sites and networks. PCs remain the company's biggest business, accounting for about 60 percent of total sales.
Of 30 analysts tracked by Bloomberg, 18 rate Dell a buy, 11 advise holding the stock and one recommends selling.
---With reporting by Rochelle Garner in San Francisco. Editor: Julie Alnwick, Cesca Antonelli |
