Dell's profit and sales miss estimates
Chief says putting company back on track will take time but plans new approaches so as to regain market share from rivals
Dell shares fell in early trading after the world's second-largest personal-computer maker posted profit and sales that missed analysts' already reduced estimates during the holiday shopping season.
The stock fell as much as 3 per cent to US$22.34 but rebounded by mid-morning. Fourth-quarter sales were US$14.4 billion and profit was 26 US cents a share before some costs and gains, Dell said on Thursday.
Analysts anticipated US$14.9 billion and 30 US cents on average, according to estimates.
Founder Michael Dell, who returned as chief executive in January, said fixing the company would take time.
He planned to devise new approaches to manufacturing and distribution to help regain the price advantage the personal-computer maker once held over rivals such as Hewlett-Packard, which copied the innovations pioneered by Dell to offer lower-priced systems.
'They invented supply chain innovation and they were the masters of efficiencies and now they say it's busted,' said Charlie Wolf, an analyst at Needham.
Before yesterday, Dell's shares had fallen 21 per cent in the past 12 months. They advanced 16 US cents to US$23.01 in Nasdaq Stock Market trading on Thursday.
Net income was US$673 million or 30 US cents a share in the three months to February 2. The results were preliminary because of a government probe into Dell's accounting. Dell reported profit of US$1.01 billion on sales of US$15.2 billion in the same quarter a year earlier.
The company said it might need to restate previous results.
JP Morgan Securities analyst Bill Shope slashed his sales and earnings forecasts for this fiscal year, saying HP was likely to step up its pressure on Dell while the company was in transition.
UBS analyst Benjamin Reitzes cut his estimates up to 2009.
'We still have a very cautious view toward Dell's lack of business model advantage versus competitors,' Mr Reitzes said.
The accounting review also remained a concern, he said.
Sales of notebook and desktop personal computers which account for more than 50 per cent of Dell's revenue, declined after the company lost customers to HP.
Notebook personal computers revenue fell 2 per cent to US$3.8 billion on a 2 per cent rise in shipments. Revenue from desktop machines also declined after shipments fell 18 per cent, the company said.
'Their notebook line totally sucks,' Mr Wolf said. 'They have a lot of work to do with notebooks.'
Mr Dell, who ousted Kevin Rollins on January 31 after the company lost the personal-computer market lead to HP, plans to shorten product development time to get products out to market faster. 'It will take time to realise the future benefits of the improvements we are making today,' he said.
The company, which stopped providing financial forecasts in May last year, had already announced in January that profit and sales for the quarter missed analysts' estimates.
The comments led analysts to reduce their profit estimates from an average of 33 US cents, according to a survey.
Price cuts aimed at winning back market share have weighed on profit margins and Dell's sales growth has fallen to its lowest in more than four years.
Dell's shipments fell 8.4 per cent in the calendar fourth quarter while HP's grew 24 per cent, IDC said.
