Dell Inc forecast fiscal first-quarter revenue that missed analysts’ estimates as lackluster demand from consumers and governments eroded growth at the world’s third-largest maker of personal computers.
Revenue for the period ending in April will decrease 7 percent to US$14.9 billion, Round Rock, Texas-based Dell said on Tuesday in a statement. That missed the average US$15.1 billion estimate of analysts, according to data compiled by Bloomberg. The shares fell in late trading after the report was released.
The sluggish sales — coupled with shrinking profit last quarter — have raised concerns about Dell’s comeback plan, which has relied on streamlining operations to boost earnings. After an almost 25 percent gain in Dell’s shares this year, some investors may have been overly optimistic about the company’s ability to turn around its operations, said Brian Marshall, an analyst at ISI Group Inc in San Francisco.
“The ship is so big that to move the needle is a herculean feat,” said Marshall, who has a “neutral” rating on the shares. “Expectations are way too high.”
Dell declined as much as 5 percent to US$17.30 in extended trading. Until now, the stock has outperformed the Standard & Poor’s 500 Index, which has climbed 8.3 percent this year.
Fourth-quarter net income declined 18 percent to US$764 million, or US$0.43 a share, from US$927 million, or US$0.48, a year earlier. Sales rose 2 percent to US$16 billion, in line with analysts’ estimates. Excluding some items, earnings will be at least US$2.13 a share this fiscal year, Dell said.
Sales in the consumer division fell 2 percent last quarter, evidence that Apple Inc is winning over buyers with its Mac and iPad devices. Revenue in the business that caters to governments slipped 1 percent amid “weakness” in purchasing by US federal agencies and governments in Western Europe, Dell said.
“When do we see revenue growth for the company start to show up?” said Abhey Lamba, an analyst at Mizuho Securities USA Inc in New York, who initiated coverage of Dell this month with a “buy” rating. “They’ve been able to grow earnings because of cost management and supply-chain improvements, but you can do that for only so long. At a certain point, revenue needs to start growing or else earnings will come down.”
Dell is suffering from competition with Apple at the high end of the market and Lenovo Group Inc (聯想) and Acer Inc (宏碁) at the low end, Shaw Wu (吳紹), an analyst at Sterne Agee & Leach Inc, wrote in a research note earlier this month.
Consumers are keeping their wallets closed as they cope with a slow economic recovery and some are opting for iPads instead of traditional notebook computers. US PC shipments declined 4.9 percent last year, the worst performance since 2001, according to research firm IDC.
In addition, last year’s flooding in Thailand crimped disk- drive production. The supply disruption will continue into the quarter that ends in October, the company said.
Microsoft Corp’s Windows 8 operating system, due later this year, may provide a lift to consumer PC sales, CEO Michael Dell said on Tuesday in a conference call with analysts. It also will entice business customers that want to buy tablets running Windows, he said. Until now, most tablets have run software from Apple or Google Inc.