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Dell Warns of Profit Shortfall, Cites Lower Pricing
May , 2006
Dell Inc. issued a warning to investors Monday, saying that preliminary numbers for the company’s 4th quarter, which ended May 5th, suggest a profit of $.33 per share, shy of the $.36 – $.38 per share the company had forecast in February. The company blamed price decreases for its computers as the primary reason behind the earnings shortfall.Dell’s share price fell by $1.63 to $24.80 per share in after hours trading, as investors reacted negatively to Monday’s news. Analysts said that competition from other low-end manufacturers from Asia, most notably China’s Lenova, have cut into the company’s profit margins.Perhaps in response to that competition from Asia, Dell announced it would be setting up a new “technology and development center” in Cyberjaya, Malaysia. The Star reported Monday that the facility will host up to 1,000 employees, and focus on process design and software development.Reuters reported that Dell plans to ramp up buying from Taiwan in 2006, spending some $12 billion on components from that country. That’s a 20% increase in purchasing from Taiwan, which earned some $10 billion in business from Dell in 2005. Dell is based in Round Rock, TX.Dell will officially announce the quarter’s results on May 18th.
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