Dell Inc warned investors yesterday that a shift in strategy to focus on higher profit margins would result in lower-than-expected revenue and earnings in the third quarter.
The surprise announcement, made after the close of trading, pushed its shares down more than 4 percent in after-hours trading; shares were up US$0.82, to US$31.88, in regular trading.
Dell said it expected earnings before special items for the quarter ended Sept. 30 to be US$0.39 a share. Most analysts had expected US$0.40.
The company, the world's largest PC vendor, expects a more pronounced decline on the top line. Dell said it would report revenue of about US$13.9 billion, compared with earlier indications that it would bring in US$14.1 billion to US$14.5 billion. It said it would announce earnings on Nov. 10.
Dell, based in Round Rock, Texas, will also take a third-quarter charge of about US$450 million, or about US$0.14 a share, resulting in earnings of US$0.25 a share. About US$300 million of that charge is related to servicing a failed part in its OptiPlex desktop systems. The charge also includes costs related to a realignment of its workforce, factories and product line.
Dell reported fully diluted earnings per share of US$0.33 in the same quarter last year.
Its biggest rival, Hewlett-Packard Co (HP), will announce its earnings on Nov. 17. Analysts expect that HP will report earnings of US$0.46 a share, up from US$0.41 a year ago.
Dell's news comes as the industry reports stronger sales growth. Gartner, the research firm, forecasts that global PC shipments will grow 12.7 percent this year. Unit sales of mobile PCs, including laptops and tablet PCs, are forecast to grow 31 percent this year, Gartner said.
But Gartner also noted that as consumers and businesses are buying at the lower-price end of the market, revenue from PC sales is expected to grow a mere 0.5 percent this year.
"The industry is running to stand still," Charles Smulders, a Gartner analyst, said.
Moreover, as growth in the industry shifts to China and India, where the lowest-price units sell fastest, the gap between revenue growth and sales growth widens.
In the same report, Gartner said that for the first time in seven years, Dell unit sales grew at the market rate, rather than above it.
Dell, which is known for driving down PC prices, has decided to sacrifice market share for profit growth, said Brent Bracelin, senior research analyst at Pacific Crest Securities in Portland, Oregon.
"Dell's been less aggressive in the entry level," he said, noting that the lowest-price Dell system has moved up to US$399 from US$299.
The company announced in September that it would also market a line of desktop and laptop computers as luxury models.
Much of the industry's growth is coming from robust demand in China and India. While Dell is reporting strong growth there, others are reporting even stronger growth. Lenovo Ltd's (
INSURRECTION: The NSB said it found evidence the CCP was seeking snipers in Taiwan to target members of the military and foreign organizations in the event of an invasion The number of Chinese spies prosecuted in Taiwan has grown threefold over a four-year period, the National Security Bureau (NSB) said in a report released yesterday. In 2021 and 2022, 16 and 10 spies were prosecuted respectively, but that number grew to 64 last year, it said, adding that the Chinese Communist Party (CCP) was working with gangs in Taiwan to develop a network of armed spies. Spies in Taiwan have on behalf of the CCP used a variety of channels and methods to infiltrate all sectors of the country, and recruited Taiwanese to cooperate in developing organizations and obtaining sensitive information
BREAKTHROUGH: The US is making chips on par in yield and quality with Taiwan, despite people saying that it could not happen, the official said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has begun producing advanced 4-nanometer (nm) chips for US customers in Arizona, US Secretary of Commerce Gina Raimondo said, a milestone in the semiconductor efforts of the administration of US President Joe Biden. In November last year, the commerce department finalized a US$6.6 billion grant to TSMC’s US unit for semiconductor production in Phoenix, Arizona. “For the first time ever in our country’s history, we are making leading edge 4-nanometer chips on American soil, American workers — on par in yield and quality with Taiwan,” Raimondo said, adding that production had begun in recent
Seven hundred and sixty-four foreigners were arrested last year for acting as money mules for criminals, with many entering Taiwan on a tourist visa for all-expenses-paid trips, the Criminal Investigation Bureau (CIB) said on Saturday. Although from Jan. 1 to Dec. 26 last year, 26,478 people were arrested for working as money mules, the bureau said it was particularly concerned about those entering the country as tourists or migrant workers who help criminals and scammers pick up or transfer illegally obtained money. In a report, officials divided the money mules into two groups, the first of which are foreigners, mainly from Malaysia
SILICON VALLEY HUB: The office would showcase Taiwan’s strengths in semiconductors and artificial intelligence, and help Taiwanese start-ups connect with global opportunities Taiwan has established an office in Palo Alto, one of the principal cities of Silicon Valley in California, aimed at helping Taiwanese technology start-ups gain global visibility, the National Development Council said yesterday. The “Startup Island Taiwan Silicon Valley hub” at No. 299 California Avenue is focused on “supporting start-ups and innovators by providing professional consulting, co-working spaces, and community platforms,” the council said in a post on its Web site. The office is the second overseas start-up hub established by the council, after a similar site was set up in Tokyo in September last year. Representatives from Taiwanese start-ups, local businesses and
RSS