SAN FRANCISCO, Nov 20 — Dell Inc’s quarterly profit plunged 54 per cent on lower-than-expected revenue as its sales to large businesses suffered, driving its shares down 6 per cent.
The weak results from the No. 3 PC maker reflect the growing divide between it and larger rival Hewlett-Packard Co, which had posted higher-than-expected preliminary earnings.
“It was universally expected they would beat because pretty much everyone else in the PC space has posted strong numbers,” Kaufman Bros. analyst Shaw Wu said of Dell. “So, the conclusion is that they lost share – lost a lot of share.”
Dell reported a net profit of US$337 million (RM1.1 billion), or 17 cents a share, for its fiscal third quarter ended October 30, down from US$727 million, or 37 cents a share, in the year-ago period.
Revenue fell 15 per cent to US$12.9 billion, missing the average analyst estimate of US$13.2 billion, according to Thomson Reuters I/B/E/S.
While the revenue shortfall was bad, some analysts were more concerned about Dell’s margins, particularly because the company had stressed profitability over growth.
Acer Inc had supplanted Dell as the world’s second largest maker of personal computers in the third quarter, fuelled by sales of cheap notebooks and netbooks.
Dell said gross margin was 17.3 per cent in the third quarter, down from 18.7 per cent in the second quarter and 18.8 per cent in the year-ago period.
“Certainly, the gross margin pressure is an issue. If they’re having to let business go because of price and gross margin pressure, that’s going to severely limit their ability to generate profit off any kind of (PC) refresh cycle,” said Pacific Crest Securities Andy Hargreaves.
Dell, which relies primarily on sales of personal computers to businesses, has suffered as companies dialled back spending during the economic downturn. Acer and HP have also been waging a price war, analysts say, particularly in consumer laptops.
Sales in Dell’s large enterprise business fell 23 per cent in the quarter, the most of any unit.
Dell Chief Financial Officer Brian Gladden said PC sales had weakened ahead of the October 22 launch of Microsoft Corp’s Windows 7 operating system. But he said sales surged afterward until the October 30 close of the quarter.
The company did not provide a formal outlook for the critical holiday-season quarter, though it said it expects revenue to be better than the third quarter, with its consumer business showing seasonal improvement.
Gladden said Dell was seeing improving signs from commercial customers, which make up 80 per cent of its sales.
“A lot of the (PC) refresh is going to be in the next fiscal year but there are some positive signs of some demand that’s coming back,” he said.
Excluding restructuring and amortization charges, profit per share was 23 cents in the third quarter. Analysts were expecting earnings per share of 28 cents, excluding items, but it was not immediately clear if that was directly comparable.
Shares of Round Rock, Texas-based Dell, which are up around 50 per cent this year, fell to US$14.87 in extended trading, after closing at US$15.87 on Nasdaq. — Reuters
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