What I do is don't trade or *daytrade* only around earnings season. So I'm at the beach today and return just now to find *twenty* posts on Dell since this morning, and it's earnings day??? Ah, but I see it's business as usual, another quarter, another warning. At this rate, I wonder if it really will matter when Dell owns the box biz... I'll tell you though, I did take advantage of the end of quarter blitz, wonder if they are making any dough on the 17" LCD flat panels I bought at $675 each...
Best regards,
John <ggg>
Dell Swung to Loss on Charge
As Sales Fell in 2nd Quarter
By GARY MCWILLIAMS
Staff Reporter of THE WALL STREET JOURNAL
Dell Computer Corp., continuing to feel the effects of weak demand and an industrywide price war, swung to a fiscal second-quarter loss and warned it wouldn't meet analysts' profit and revenue expectations for the third quarter.
The Austin, Texas, company did manage to increase its unit shipments 19% amid a world-wide computer slump that has seen rivals suffer double-digit declines.
For the second quarter ended Aug. 3, the world's largest personal-computer maker reported a loss of $101 million, including a $742 million one-time charge, or four cents a share, compared with a profit of $603 million, or 22 cents a share, a year earlier.
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It was the company's first loss, albeit after the one-time charge, in eight years and only its second as a publicly traded company. Dell said the results reflected "continued intensive price competition."
Excluding the charge, Dell earned $433 million. Dell took the hefty charge for costs associated with a layoff of 3,000 employees, plant consolidations and a write-down of investments. The write-offs include equity investments and its $340 million acquisition of storage developer ConvergeNet Technologies Inc.
The company reported sales of $7.61 billion, down 1% from $7.67 billion a year earlier.
Dell went on to forecast third-quarter earnings between 15 cents and 16 cents a share on sales about 10% below the $8.26 billion of the year-earlier quarter. That forecast is below analysts' consensus estimate of a profit of 17 cents a share, on revenue of $7.98 billion, according to Thomson Financial/First Call. Its forecast for the third quarter calls for revenue between $7.23 billion and $7.61 billion.
"We just don't see a strong catalyst for a huge demand pickup in the third quarter," Chairman Michael S. Dell said in a conference call with investors. Additional weakness in Europe and Asia is undermining the prospect for a near-term pickup in sales, executives said. The company declined to forecast fourth-quarter results.
"We gained considerable market share," Mr. Dell said. "We are well-positioned for a bounce back that should begin in the spring of next year."
Investors, however, were spooked by the bellwether's gloomier-than-expected third-quarter outlook.
In after-hours trading, Dell shares slid 62 cents to $24.76. Before the release of its results, Dell traded at $25.38, down 12 cents, in 4 p.m. trading Thursday on the Nasdaq Stock Market.
Don Young, an analyst at UBS Warburg, noted that Dell posted a large decline in operating profit despite increasing computer shipments 19% and implementing deep cost cuts.
"I don't know how it can claim victory with a $200 million drop in operating income," he said. He called the decline further evidence the industry price war is taking nearly the same toll on Dell as rivals.
As a result of cost cuts, including a 3,000-employee reduction in its work force during the quarter, Dell reduced operating expenses to 10.3% of sales, down from 11.7% a year earlier. It also continued to increase its turnover of computer parts, paring inventories to four days' worth of sales from seven days a year earlier.
Mr. Young said Dell has had to increasingly rely on cost cutting to avoid larger profit declines. Dell "used to compete on asset velocity, now they are really competing on expense [cuts]," he said.
The company's sales slipped across the board from year-earlier levels. In North and South America, which contributes two-thirds of sales, revenue fell 3%. European sales rose just 2%, below the 10% gain of a year ago, and in Asia, its sales rose 15%, below the 48% growth of a year earlier.
Dell said it continues to expect corporate-PC demand will rise early next year as corporations replace PCs purchased in the run up to the year-2000 bug fix.
"Until that catalyst takes hold, demand will likely continue to be soft," said Dell Chief Financial Officer James M. Schneider.
In contrast to Dell's outlook for third-quarter PC shipments that are now flat to slightly lower than a year earlier, suppliers and rivals such as Intel Corp. and Compaq Computer Corp. recently reported demand for computer chips and corporate PCs has started to firm up.
Write to Gary McWilliams at gary.mcwilliams@wsj.com |
