This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Dell's Sky Darkens

Updated from 1:05 p.m. EDT

Dell's (DELL - Get Report) rare move of lowering financial targets had investors scrambling on Friday, knocking nearly 8% off the company's share price, as tougher times have suddenly appeared to have set in.

And it's not clear when they'll go away.

Dell was recently down $3.07 to $36.51 on Friday -- its lowest level since early May.

Late Thursday, Dell hit its second-quarter earnings-per-share target but missed Wall Street's sales target by $300 million. The company reported net income of 41 cents a share, or 38 cents when excluding a tax provision, and sales of $13.4 billion.

The company blamed overly aggressive pricing in the U.S. consumer market and a sound drop-off in spending by the U.S. federal government as the main culprits for the quarter.

To the first issue, Dell dropped its prices in the quarter on certain products, expecting to make up for the lost revenue through a commensurate increase in volume. The snapback didn't materialize, and Dell couldn't reach expected sales goals.

In effect, consumers weren't willing to spend money on additional products just because prices were lowered. This isn't a good sign heading into the part of the year when the consumer is supposed to be spending heavily for fancy electronics gear and computers. Domestic consumers make up some 10% of Dell's sales.

As for federal spending, which makes up close to 20% of Dell's total revenue, Dell said it's been weak for the past year, and the company saw this business slumping more notably in the second quarter. It doesn't anticipate this business coming back in the third quarter.

Also troubling: Component pricing isn't expected to decline as much in the third quarter as it did in the second quarter due to tight supplies, which could act as a bit of a squeeze on profits. CEO Kevin Rollins said he was able to get the supplies he needed, but the market is "tighter than it has been for awhile." This, too, is expected to continue in the third quarter. He singled out shortages of some processors and chipsets from Intel (INTC - Get Report).

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
DELL $0.00 0.00%
HPQ $32.01 0.00%
AAPL $124.24 0.00%
AMAT $22.40 0.00%
INTC $30.08 0.00%

Markets

DOW 17,678.23 -40.31 -0.23%
S&P 500 2,056.15 -4.90 -0.24%
NASDAQ 4,863.3620 -13.1570 -0.27%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs