Dell Gets Bloodied Up

Updated at 9:35 a.m. EDT

The battle for market share is getting bloody at Dell(DELL Quote - Cramer on DELL - Stock Picks).

For the second time in two months, the personal computer maker took a knife to earnings estimates Friday, predicting net income of 21 cents to 23 cents a share on sales of $14 billion in the second quarter. Analysts were looking for earnings of 32 cents a share on sales of $14.23 billion.

Shares of the Round Rock, Texas, computer maker tanked $2.61, or 12%, to $19.25 Friday morning. Earlier, the stock fell to $19.05, its lowest price since September 2001.

"These estimates primarily reflect aggressive pricing in a slowing commercial market worldwide," Dell said.

On May 9, the company estimated first quarter net income at 33 cents a share on sales of $14.2 billion. That was down from the then-current forecast for earnings of about 37 cents a share on revenue of $14.2 billion to $14.6 billion.

The pain for Dell's investors reflects a decision by the company to trade near-term profitability for market share in an increasingly cut-throat industry. Dell has aggressively lowered prices throughout the last two months in an effort to squeeze out competitive incursions by rivals, mainly Hewlett-Packard(HPQ Quote - Cramer on HPQ - Stock Picks).

A week ago, Dell announced sweeping changes to its PC pricing strategy, replacing many promotions and rebates with lower list prices. "It became increasingly clear that a simple pricing and sales structure would make it easier for customers," Ro Parra, the head of Dell's home and small-business group, said at the time. "We'll continue to offer customers the best value every day with excellent support."

Dell carried out a separate price reduction in May.

(To watch Farnoosh Torabi's video take on Dell's recent pricing plans, please click here.)

Nevertheless, Dell's lowered forecast is another dose of reality for tech investors hoping for signs of a revival on the demand side. Earlier this week, Intel(INTC Quote - Cramer on INTC - Stock Picks) reported sharply lower second-quarter earnings and reduced sales guidance for coming months, and last night Advanced Micro(AMD Quote - Cramer on AMD - Stock Picks) reported earnings that fell short of analyst forecasts.