Dell Reports Strong Second Quarter, Spooks Investors with Full Year Forecast
Dell Reports Strong Second Quarter, Spooks Investors with Full Year Forecast
Posted 08/17/2011 at 8:50am
| by Paul Lilly
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Dell on Tuesday reported financial results for its second fiscal quarter of 2012 and described its performance as "strong" based on $15.7 billion in revenue. That's up 1 percent from last year, and 4 percent sequentially. Meanwhile, Dell's operating income for the first half of 2012 jumped 50 percent, and GAAP earnings per share rose a healthy 71 percent to 48 cents. So why did Dell's stock drop so sharply in after hours trading?
Consider Dell's second fiscal quarter the calm before the storm. The OEM spooked investors by downgrading its full-year revenue forecast from a 5-9 percent growth rate to 1-5 percent. Even though Dell is still expecting revenue to climb, this was enough to send the company's stock down 7 percent in pre-market trading today, according to Reuters.
"Dell's shares will likely remain in a trading range near term as investors struggle to weight better profitability against slower sales growth," Reuters cites RBC Capital Markets writing in a research note.
Dell's full-year revenue downgrade is "based on strategic decisions to redirect resources from lower- to higher-value solutions and a more uncertain environment," or in plain English, Dell expects customers to tighten up their spending in the coming months.
Image Credit: flickr (Oracle_Photos_Screenshots)
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big_montana
August 17, 2011 at 10:37am
Companies are not tightening up on spending as Dell suggests, they are just moving away from Dell's unreliable, fugly, old generation products to Lenovo and HP next gen products, at a much cheaper cost then what Dell is selling at. I know this for a fact, as I am purchasing 360+ laptops for my firm and Dells latest offerings leave a lot to be desired. Their Latitude E6320 uses 1st gen Sandybridge, and they just released two new Latitude models that are using Core 2 Duo's. WTF? It looks like Lenovo for us, and I know of three other companies in my area making the switch to Lenovo from Dell. Total purchases will be in excess of 7,000 laptops. Desktops to be replaced a year later, and Dell will be losing more sales then too, as everyone likes consistency.
I Jedi
August 17, 2011 at 9:13am
Eventually, the resistance from the stock market will be met with support for the cheaper stock. I only wish I had some significant money to blow on Dell's stock right now, as they continue to plummet. Right now, as of this posting, they're down a whole $1.54. That may not sound like much, but most companies that have been around a long time don't usually fluctuate so badly. For example, AMD's stock price has been sitting around $6.xx for quite awhile now.
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