Dell's 3Q Results Slide With Rest Of PC Industry
SAN FRANCISCO (AP) -- Dell Inc.'s financial performance deteriorated along with the rest of the personal computer industry in the third quarter as the company scrambled to expand into other technology fields to offset problems facing its main business.
The results announced Thursday reinforced fears that Dell could be stuck in a funk that may last several years. The reason: Dell, like long-time rival HP, gets much of its revenue from PCs, machines that have been losing their appeal as both consumers and corporate buyers become more enamored with less expensive smartphones and tablet computers. A feeble economy, especially in Europe and China, is posing additional challenges.
Although investors were braced for a dismal quarter, Dell's numbers were slightly worse than analysts expected. Management dampened spirits even further by offering a fiscal fourth-quarter forecast that raised the possibility of Dell's revenue falling by as much as 13 percent from the same time last year — even bigger than the decline suffered in the most recent quarter. That would mark the fourth consecutive quarter in which the magnitude of Dell's year-over-year revenue decline has widened.
The sobering outlook doused any lingering hopes that Dell might get a holiday sales lift from the release of Windows 8, a radical makeover of the Microsoft Corp. operating system that powers most PCs. In a conference call with analysts, Dell executives said they expected the PC market to remain lackluster, at best, for at least two more quarters.
ISI Group analyst Brian Marshall now thinks it will take Dell several years to bounce back. He made the prediction in a Thursday research note that declared Dell is "still between a rock and a hard place."
Dell's stock price slid by 15 cents to $9.41 in extended trading after the results and disappointing forecast came out. The shares have lost nearly half their value during the past nine months as it has become increasingly clear the company wasn't likely to quickly adapt to the growing demand for sleek, hand-held devices controlled by a few swipes of the finger.
In the latest quarter, revenue in Dell's mobility division fell by 9 percent from the same time last year, while desktop computer sales decreased by 8 percent.
Overall Dell's fiscal third-quarter revenue dropped 11 percent from last year to $13.72 billion.
The company, based in Round Rock, Texas, remains profitable, despite its retreat.
Dell earned $475 million, or 27 cents per share, for the three-month period end Nov. 2. That represented a 47 percent decline from net income of $732 million, or 42 cents per share, at the same time last year.
If not for certain expenses and accounting charges unrelated to its ongoing business, Dell said it would have earned 39 cents per share. That was a penny below the average estimate among analysts polled by FactSet.
The company's third-quarter revenue missed analysts' targets by about $170 million.
In the current quarter Dell expects revenue to increase by 2 to 5 percent from the third quarter. That implies fourth-quarter revenue will come in 10 to 13 percent lower than the comparable quarter in the previous year. Part of the difference steams from this year's fourth quarter having one less week than the previous year. But Dell also expects to book an additional $180 million to $200 million from its recent $2.4 billion acquisition of Quest Software, which didn't contribute to last year
Dell reaffirmed a previous forecast calling for full-year adjusted earnings per share of at least $1.70.
The company is trying to cope with the downturn in its PC business by expanding into selling software, technology consulting, data storage and computer servers to big companies and government agencies. All those specialties produce higher profit margins than selling PCs and printers.
Dell's servers and networking business posted an 11 percent gain from last year. It was helped by several acquisitions.
Meanwhile, Consumers showed little interest in Dell's laptop and desktop computers, largely because they tend to be higher price than other PCs relying on the Windows operating system. The company said it suffered an operating loss of $65 million selling its devices to consumers during the third quarter, contrasting with an operating profit of $99 million at the same time last year.