Dell shares fall after disappointing outlook
AP Business Writer
DALLAS ” Shares of Dell Inc. fell Friday after the personal-computer maker issued a first-quarter outlook below Wall Street’s expectations.
Dell Inc. shares fell $1.81, or 5.7 percent, to $30.15 in afternoon trading on the Nasdaq.
Dell said Thursday after financial markets closed that profit jumped 52 percent, to about $1 billion in the three months that ended Feb. 3, helped by strong sales to businesses and international customers.
Sales, however, rose a much more modest 13 percent ” and that was partly because the company’s fourth quarter had one more week than the fourth quarter a year ago.
On top of that, Dell offered a first-quarter outlook that called for a revenue gain of 6 percent to 9 percent. The forecast drew lots of attention Thursday because it was less than analysts were expecting and because Dell routinely promised increases in the mid-teens just a few quarters ago.
Dell said it earned $1.01 billion, or 43 cents per share in the fourth quarter, compared to $667 million, or 26 cents per share a year earlier. Analysts had expected 41 cents per share in the most recent period, according to Thomson Financial.
Overall revenue rose to a record $15.18 billion, topping Wall Street’s $14.82 billion forecast. Sales outside the United States jumped 21 percent.
Round Rock-based Dell said first-quarter earnings would be 39 cents to 41 cents per share excluding a cost of 3 cents per share for stock compensation. Analysts had forecast 42 cents per share.
The company also said first-quarter would be $14.2 billion to $14.6 billion, below analysts’ prediction of $14.73 billion. Chief Executive Kevin Rollins called that a typical post-holiday slowdown in the technology sector.
“We are not seeing anything fundamentally that’s slowing the market down,” Rollins said. “We just think … with the normal seasonality changes and the size of our company, this is a good forecast for the market.”
Brent Bracelin, an analyst with Pacific Crest Securities, called the company’s prediction of first-quarter sales “very tepid” and the latest in a string of increasingly conservative growth forecasts.
“They have been lowering the bar and lowering their growth-rate targets,” Bracelin said. “At what point do they stop lowering their growth rate?”
Bracelin said Dell faces a tougher year ahead than in 2005 because of slower growth and falling prices for computers. Even notebooks, which used to be a premium item, are sold for about or even under $500 by Dell, Hewlett-Packard Co. and Best Buy Co. Inc.
Dell has diversified into printers, servers, storage equipment and consumer products in recent years with good results, but three-fifths of its business remains PCs and laptops.
Some analysts think the company was just being conservative about first-quarter sales after falling short of revenue predictions twice last year.
“They are back on track now,” said John Coyle, an analyst with JMP Securities, referring to the fourth-quarter sales. “The last thing they want to do now is be too aggressive.”
For the 12 months that ended Feb. 3, Dell said it earned $3.57 billion or $1.46 per share, compared to $3.04 billion or $1.18 per share the year before. Revenue rose 14 percent, to $55.91 billion.
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