Dell shares fall on earnings miss, outlook

Tue Feb 21, 2012 6:42pm EST
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By Poornima Gupta

SAN FRANCISCO (Reuters) - Dell Inc forecast fiscal first-quarter revenue below Wall Street's expectations, stoking fears the PC industry has not fully emerged from its downturn and sending the company's shares more than 4 percent lower.

The world's No. 3 personal computer maker projected sales would be down 7 percent this quarter from the previous quarter, when it posted revenue of $16 billion. That translates into about $14.9 billion, below the average forecast for roughly $15.2 billion.

Dell's fiscal fourth quarter earnings also came in below Wall Street's view as strength in its corporate business unit was offset by the weakness in the division that caters to public businesses.

Chief Financial Officer Brian Gladden said profit margins for the quarter were hurt by a combination of weakness in U.S. public spending, discounting of the leftover inventory of its previous generation phones and the lingering impact of the Thailand flood on its product mix.

"We just didn't get the mix of drives that we wanted and it really forced us to sell less configured lower-end systems and prevented us from accessing higher margin more highly configured systems," he said.

Gladden said he expected the hard-disk drive issues to continue this year.

PC makers have grappled with slackening demand as mobile devices such as Apple Inc's iPad erode market share, while a shortage of hard drives after flooding in Thailand crimped supply.

Investors were disappointed by the "lack of the upside in the quarter," ISI Group analyst Brian Marshall said. "It's going to take a little bit of time for Dell to turn around the tanker ship."   Continued...

A Dell computer logo is seen on a laptop at Best Buy in Phoenix, Arizona, February 18, 2010. REUTERS/Joshua Lott