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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

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

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!
DOW 16,563.30 -317.06 -1.88%
S&P 500 1,930.67 -39.40 -2.00%
NASDAQ 4,369.7730 -93.1290 -2.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

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