Dell disapponts on revenue forecast

February 22, 2012

Dell forecast fiscal first quarter revenue that missed analysts' estimates as lackluster demand for personal computers and competition from Apple Inc. eroded growth.

Revenue for the period ending in April will decrease 7 per cent to $US14.9 billion, Round Rock, Texas-based Dell said today in a statement. That missed the average $US15.1 billion estimate of analysts, according to data compiled by Bloomberg. Per-share earnings excluding certain items will exceed $US2.13 in fiscal 2013, compared with analysts' $US2.06 estimate. Shares fell in late trading on the forecast.

“When do we see revenue growth for the company start to show up?” said Abhey Lamba, an analyst at Mizuho Securities USA Inc. in New York, who initiated coverage of Dell Feb. 8 with a “buy” rating. “They've been able to grow earnings because of cost management and supply-chain improvements. But you can do that for only so long. At a certain point, revenue needs to start growing or else earnings will come down.”

Dell, the third largest maker of PCs, is suffering from competition with Apple's Macs and iPads at the high end of the market and Lenovo Group Inc. and Acer Inc. at the low end, Shaw Wu, an analyst at Sterne Agee & Leach Inc. wrote in a Feb. 15 research note.

Consumers are keeping their wallets closed amid a slow economic recovery or opting for iPads instead of traditional notebook computers. Global PC shipments last year declined 4.9 per cent, the worst performance since 2001, according to research firm IDC. In addition, hard disk drive production was crimped after last year's flooding in Thailand.

Microsoft Corp.'s Windows 8 operating system, due later this year, may provide a lift to consumer PC sales. In addition, Dell is selling more of its own data storage and networking gear instead of relying on products made by such companies as EMC Corp.

Profit in the fourth quarter declined to $US764 million, or 43 cents a share. Sales rose 2 per cent to $US16 billion, in line with analysts' $US16 billion estimate.

Bloomberg