Dell in after-hours trading--lower than previously reported?
From iionline.com:
Dell Plunges in After-Hours Trading
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Staff Writer: Craig Schneider (2/16/99)
Dell Computer (NASDAQ: DELL) reported its fourth quarter results after the close on Tuesday with sales of $5.17 billion, a 38% increase but less than what some analysts expected. Shares fell by as much as $13.25 to $75.50 in after-hours trading.
Earnings per share for the quarter, ended January 29, climbed 55% to $0.31, in-line with what analysts were expecting. The company also declared a 2-for-1 stock split to be issued on March 5 for shareholders of record as of February 26.
But concern over the slowdown in Dell's sales -- one of the reasons we downgraded Dell to 'sell' on Friday at a price of $94-- should not be ignored.
Some analysts were expecting sales as much as $5.5 billion and even Dell's Chief Financial Officer Tom Meredith said the company's sales growth fell short of the company's own targets. He blamed the shortfall on Dell's decision not to enter the market for low-priced PCs.
In addition to Dell's absence from the competitive sub-$1,000 PC market, Compaq Computer (NYSE: CPQ) is starting to sell more computers directly to consumers, imitating Dell's success strategy. And Dell's rivals are also fighting back with new products.
As we noted in a prior update, Ashok Kumor, a Piper Jaffray analyst, indicated a slowing of Dell's sales growth in the last two quarters of 1998. Dell's sales increased about 3% in North America from the third quarter, while Compaq gained about 30% and the overall market increased 16%.
Selling, general & administrative expenses reported a steady rise from the prior quarters during the year. But during the quarter, the company generated a record $752 million in cash from operations.
For fiscal 1999, revenue increased 48% to $18.2 billion, a slowdown from growth in prior years. Earnings per share for the year was $1.05, a 64% increase over last year. Operating margins also rose to a record 11.4% for the quarter, compared with 10.6% a year ago.
Bottom line:
For now, we think investors are still wise to avoid Dell's shares.
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