The giant computer maker reported earnings of $337 million and revenue of $12.9 billion. The slump in quarterly earnings implies that Dell is far away from the recent recovery in the personal computer market.
Dell’s shares fell by 9.2 percent and consumer sales declined by 1 percent. Sales to large companies went down by 23 percent, while sales to public sector organizations went down by 7 percent.
Market share lost to HP and Acer
Dell has recently lost a large part of its market share to Hewlett-Packard Co. and Acer Inc. It is now struggling to increase its consumer laptop sales.
A large portion of the decline is due to increased taxes and interest rates. Tax rates are expected to be up for the rest of the quarter.
“We have been recommending for some time to investors that they should be investing in HP as opposed to Dell. We have had ongoing concerns about Dell as far as market share losses in its core PC space,” said Philip Alling, an analyst at Atlantic Equities.
The corporate PC upgrade cycle has "long been the investment case on the stock ... but they have much less exposure to the consumer sector and you've seen better strength there thus far this year," he said.
Another analyst, Andy Hargreaves of Pacific Crest said, “The problem with Dell is that there's a lot of risk and the risks aren't insignificant. The PC refresh story is fairly straightforward and in a static world it would be perfect ... but it's not a static world. They face a lot of competition, and right now they seem to be ratcheting up the price competition.”
Demand picking up despite slowdown
But despite the recent slowdown, one cannot refute that there has been a pickup in corporate demand, especially sales in the medium and small business segments.
Dell has also moved into newer markets like Singapore in the past few months. Also, after recently acquiring Perot Systems Dell gets 80 percent of its revenue from corporate customers.
Founder Michael Dell wants to transform the organization as a service provider to customers and not just a computer maker. Plans to sell smartphones in China and Brazil have also been announced, of late.
Post new comment