Dell Inc forecast disappointing second-quarter revenue as US and European corporate tech spending weakens and consumer PC sales continue to shrink, hammering its shares.
Shares in the company, which like rival Hewlett-Packard Co is losing market share to mobile devices such as Apple Inc’s iPad, dived more than 11 percent in after-hours trade.
The world’s No. 3 PC maker forecast a 2 percent to 4 percent revenue gain this fiscal quarter, to US$14.7 billion to US$15 billion, well short of the US$15.4 billion Wall Street had been expecting.
“Clearly we are seeing a bit more challenging demand environment,” Dell chief financial officer Brian Gladden said in an interview. “Europe, in general, was down for us.”
Demand from US federal businesses appears to be improving slightly, he said. “We are seeing a pretty good pipeline there.”
Dell’s quarterly revenue fell more than analysts had expected, hurt by weak sales to consumers, large enterprises and government units. PC makers have struggled with slowing demand as mobile devices such as the iPad erode market share.
Brian Marshall, an analyst with ISI Group, said the “real poor results” shows that it will take Dell more time to transform itself from a PC company to a one-stop shop for all the information technology needs of corporations.
“It clearly is disappointing,” said Shaw Wu, an analyst with Sterne Agee. “The expectations heading into the quarter were not even that high.”
Dell’s sales to consumers took a big hit, with consumer revenue slipping 12 percent to US$3 billion. Sales to large corporations declined 3 percent to US$4.4 billion.
Dell said revenue in its fiscal first quarter declined 4 percent to US$14.4 billion, below the average analyst estimate of US$14.9 billion according to Thomson Reuters I/B/E/S.
Excluding one-time items, the company earned US$0.43, less than the average Wall Street estimate of US$0.46.
Net income fell to US$635 million, or US$0.36 a share, from US$945 million, or US$0.49 a share, a year earlier.
Gross margins for the quarter came in at 21.3 percent.