This Day On The Street
Continue to site
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

Dell Price Cuts Helping Only So Much

Is Dell (DELL) fighting yesterday's war?

That's one possibility that weighed on the shares of the world's No. 1 PC vendor in the wake of its announcement Monday that its first-quarter financial results would once again come up short.

Like a military superpower that can't adjust its tactics to take on a new enemy, Dell may effectively be fielding tank battalions in a confrontation where air supremacy is the key.

Faced with slowing demand and increased competition, Dell unsheathed its most trusted weapon in the first quarter: price cuts.

But while the price cuts appear to have taken the expected toll on Dell's margins, they don't seem to have delivered the payload of sales growth.

Revenue in the first quarter will come in at $14.2 billion, according to Dell, vs. its previous estimate of $14.2 billion to $14.6 billion. EPS will be 33 cents, compared with the company's earlier projection of 36 cents to 38 cents.

In its preannouncement, Dell stated that it had taken pricing actions in the first quarter in order to "accelerate revenue growth in the future."

The price cuts' lack of immediate results left many analysts and investors skeptical about the plan.

Shares of Dell were down 4.12%, or $1.09, at $25.34 in midday trading Tuesday.

"Even with aggressive month-of-April pricing, Dell could do no better than reach low-end revenue targets, raising questions about how successful pricing will be going forward as a sustained way to achieve growth," wrote Goldman Sachs analyst Laura Conigliaro in a note to investors lowering her EPS estimates for the 2006 calendar year.

In fact, noted Conigliaro, Dell itself doesn't seem convinced that the price cuts are the solution to its problems. As recently as the July 2005 quarter, she said, Dell blamed overly aggressive cuts for its poor results, adding that the measure wasn't able to drive enough incremental unit volume.
1 of 3

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
Only $9.95
14-Days Free
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
SYM TRADE IT LAST %CHG
DELL $0.00 0.00%
AAPL $124.53 -1.75%
FB $85.80 -2.51%
GOOG $521.52 -1.91%
TSLA $262.02 -1.90%

Markets

DOW 17,596.35 -350.33 -1.95%
S&P 500 2,057.64 -43.85 -2.09%
NASDAQ 4,958.4680 -122.0370 -2.40%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs