Dell sees consumer sales shrinking

Dell sees consumer sales shrinking

FMCG SUPPLIER NEWS

IOL Business - May 23rd 2012, 09:33

San Francisco - Dell forecast disappointing second-quarter revenue as United States and European corporate tech spending weakens and consumer personal computer sales continue to shrink, hammering its shares.
 

Shares in the company, which like rival Hewlett-Packard is losing market share to mobile devices such as Apple's iPad, sank more than 11 percent in after hours trade.

The world's No. 3 PC maker forecast a 2 to 4 percent revenue gain this fiscal quarter, to $14.7-billion to $15-billion, well short of the $15.4-billion Wall Street had been expecting.

“Clearly we are seeing a bit more challenging demand environment,” Dell Chief Financial Officer Brian Gladden said in an interview. “Europe, in general, was down for us.”

Demand from US federal businesses appears to be improving slightly, he noted. “We are seeing a pretty good pipeline there.”

Dell's quarterly revenue fell more than analysts had expected, hurt by weak sales to consumers, large enterprises and government units. PC makers have struggled with slowing demand as mobile devices such as the iPad erode market share.

Brian Marshall, an analyst with ISI Group, said the “real poor results” shows that it will take Dell more time to transform itself from a PC company to a one-stop shop for all the information technology needs of corporations.

“It clearly is disappointing,” Shaw Wu, an analyst with Sterne Agee, said. “The expectations heading into the quarter were not even that high.”

Dell's sales to consumers took a big hit, with consumer revenue slipping 12 percent to $3-billion. Sales to large corporations declined three percent to $4.4-billion.

Dell said revenue in its fiscal first quarter declined four percent to $14.4-billion, below the average analyst estimate of $14.9-billion according to Thomson Reuters I/B/E/S.

Excluding one-time items, the company earned 43 cents, less than the average Wall Street estimate of 46 cents.

Net income fell to $635-million, or 36 cents a share, from $945-million, or 49 cents a share, a year earlier.

Gross margins for the quarter came in at 21.3 percent.

“April was not what we expected,” Gladden told analysts on a conference call, but he added that the “pipelines look pretty good.”

Dell's shares traded at $13.20 after hours, down from a $15.08 close on Nasdaq.

Dell's poor showing comes a day before larger rival HP reports its quarterly earnings. Shares in the No. 1 PC maker, which sources say plans to lay off more than 25 000 employees globally as it tries to revive its business, edged down 2.5 percent to $21.24 from a close of $21.78 on the New York Stock Exchange.

HP is merging its PC and printing divisions to shore up margins in the personal computing business. - Reuters