Dell Reports Strong Second Quarter, Spooks Investors with Full Year Forecast

Paul Lilly

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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