Dell shares slump as earnings disappoint
While revenue increased from a year ago, to more than $16 billion, Dell's profit fell 17% as the company said its margins were hurt by low pricing as it works to build out its consumer product lines and overseas markets.
Total gross margins as a percent of
revenue fell to 17.2% from nearly 20% a year ago. With its margins in
decline, Dell said it earned $616 million, or 31 cents a share, on
revenue of $16.43 billion, compared with a profit of $746 million, or
33 cents a share, on $14.78 billion in sales in the year-ago quarter.
Dell's global consumer business saw its
revenue rise 28% from a year ago to $2.8 billion, as shipments rose
53%. However, the division reported an operational loss of $5
million, compared to a profit of $5 million a year ago, as the
company expanded its retail presence and competed on pricing with
established rivals such as Hewlett-Packard Co.
Notebook PCs continued to show more
growth, with revenue of $4.87 billion, up 26% from a year ago, and
nearly equal with Dell's desktop sales of $4.93 billion. However,
desktop revenue was down 2% from the prior-year's second quarter.
Software sales rose 17% to $2.8 billion and servers and networking
revenue totaled $1.7 billion, up 5% from a year ago.
Dell didn't give a third-quarter
forecast, saying only that the company "sees continued
conservatism in IT spending in the U.S.," which has begun to
spread into Western Europe and parts of Asia.
Analysts currently estimate Dell will
earn 41 cents a share on $16.74 billion in sales for its third
quarter.
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