As PC sales continue to be pressured by tablets, smartphones and mobile devices, Dell said it expects third-quarter revenue to fall between 2% and 5% sequentially. It also lowered full-year earnings guidance to at least $1.70 per share. Analysts surveyed by Thomson Reuters were looking for earnings of $1.90 a share.
Deutsche Bank analyst Chris Whitmore is concerned that the pent up demand for Microsoft's (MSFT) Windows 8 will not be enough to stabilize the PC results. "Although the Win 8 launch should drive some inventory restocking and pent-up demand into the holidays, we remain concerned that Win8 tablets and NBs (notebooks) are unlikely to catalyze a sustained PC demand cycle," Whitmore wrote in a research note. He rates Dell "buy" with a $16 price target.
Results, however, were not all bad with several units of the Round Rock, Texas-based company showing growth, most notably server and networking, which saw revenue growth of 14%. Calling this growth "robust," Brean Murray analyst Ananda Baruah took some comfort that this segment can offset some of the pressures in the PC market. "It is evident, that as companies pull back on discretionary PC purchases, they continue to invest in the data center, and we believe the strength in the ESS [Enterprise Solutions and Services] segment can continue to offset some of the downward pressure emanating from the PC market," Baruah wrote in a research note. He rates Dell shares "buy," but lowered his price target from $15 to $14 following the results. In the fiscal second-quarter, Dell earned 50 cents a share on $14.48 billion in revenue. Analysts polled by Thomson Reuters were looking for 45 cents a share on $14.64 billion in revenue. Credit Suisse analyst Kulbinder Garcha noted that two of Dell's higher margin contributors, servers and Dell storage, are posting slower growth, and require investment as they become more important to the company. Servers and storage already account for 16% of Dell's sales.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- 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 + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV