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 user 2005-08-13 at 7:24:00 am Views: 87
  • #12496

    Dell Shares Sink on Weak Quarter

    DALLAS (Aug.05)- Dell Inc.’s shares stumbled on Friday
    after the company reported that low-priced laptops and other bargain systems
    cramped its second-quarter revenues.

    The rare revenue miss – nearly $300 million below Wall
    Street forecasts – came atop a 28 percent jump in net income Dell reported late
    Thursday after the market closed. The company also issued an outlook for the
    third quarter that was at the low end of analyst forecasts.

    Dell shares fell 8.5 percent, or $3.36 a share, to $36.22
    in early trading on the Nasdaq Stock Market Friday. The shares have traded in a
    range of $32.71 to $42.57 over the past 52 weeks.

    Revenue at the world’s largest PC maker rose 15 percent to
    $13.43 billion from $11.71 billion last year. The results matched analyst
    forecasts of 38 cents per share but fell below projected revenue of $13.71
    billion, according to Thomson Financial.

    Quarterly profit climbed to $1.02 billion, or 41 cents per
    share, from $799 million, or 31 cents per share, during the year-ago period.
    Results included a 3-cent tax benefit, without which it would have earned 38
    cents per share in the latest quarter.

    Chief Executive Kevin Rollins said the revenue shortfall
    resulted from U.S. consumers who stuck with cheap, low-end desktops and laptops
    instead of upgrading to pricer, more profitable models.

    “We can sell systems at $299 and $399, but we don’t want
    to,” he said.

    He said the company did not see the consumer business that
    it normally gets. “That just got away from us. We stumbled there but we’ll get
    that back in line,” Rollins said.

    Still, Round Rock, Texas-based Dell reported an
    industry-record shipments of 9.1 million computer systems – including 2.7
    million mobility products – and company-record revenue of more than $2 billion
    from software and peripheral products, including printers and displays for the
    quarter ending July 29.

    The strongest gains were in sales of laptops, which
    increased 20 percent year-over-year, while revenue from outsourced computer
    system management grew 41 percent from the year-ago quarter.

    Tim Bajarin, analyst at Creative Strategies, said Dell’s
    numbers were good considering the squeeze facing the overall industry.

    “Just knowing how well they compete, I have to believe that
    things bode pretty well for them and even the industry in general,” he said.
    “At the same time, they’re going to have to be much more aggressive in their
    marketing to try to get people to go into the mid- and upper-range

    Later this year, Dell is expected to launch a new line of
    high-priced premium PCs, but the company has declined to discuss any details of
    that strategy.

    Rollins said there was a “tight” supply of components such
    as memory chips and flat panel displays which he predicted would last through
    the third quarter. But, he did not anticipate any price increases.

    Globally, Dell posted a quarterly growth rate of 18
    percent. Most of that was in European and Asian markets, which grew at 21
    percent and 24 percent, respectively. The U.S., meanwhile, saw a less robust 11

    Dell predicted continued steady purchase rates by corporate
    customers, the seasonal impact of back-to-school buying in the consumer segment
    and continued growth in markets outside of the United States would drive
    business in the third quarter.

    It expects third-quarter earnings in the range of 39 cents
    to 41 cents per share on revenue between $14.1 billion and $14.5 billion. Wall
    Street, meanwhile, anticipates earnings of 41 cents per share on higher revenue
    of $14.63 billion.

    The company bought back another $1.8 billion in stock
    during the quarter. Dell has spent $3.8 billion in the past six months as it
    continues to reduced the number of outstanding shares.