Dell Stock Lower After Hours, Reports Disappointing Q2 Earnings
Shares of PC giant Dell Inc. (DELL: Charts, News) fell in afterhours trading on Tuesday, dropping -0.54 or -4.54 percent to $11.78 per share, after having lost -0.22 or -1.75 percent in Tuesday's regular trading hours. After the close, the company reported an 18 percent drop in second quarter earnings.
The company's revenue for the second quarter fell by eight percent, due primarily to lagging computer sales and a slow economy. Dell also warned that the company could continue struggling as it moves away from its original business selling PCs and into storage, servers and networking products. Daily Chart
Round Rock, Texas based Dell Inc. is one of the world's largest computer technology companies, with over 100,000 employees worldwide and the third largest dealer of PCs globally. Dell announced earnings for the second quarter of $732 million or $0.42 per share, versus $890 million or $0.48 per share in the same period one year ago. Revenue dropped to $14.5 billion from $15.7 billion in Q2 of 2011. The company now expects to earn $1.70 for the year, versus a previous forecast of $2.13 per share made in May. Sales are also expected to drop by two to five percent in the third quarter. Dell's business has been severely impacted by declines in PC sales, falling by -14 percent year on year, with consumer sales dropping -22 percent in the quarter. Nevertheless, sales in networking products and servers rose +14 percent while the company's services business expanded by three percent. Dell has grown through a combination of expanding its customer base and through major acquisitions; most notably it acquired Alienware in 2006 and Perot Systems in 2009. More recent acquisitions include AppAssure, Clerity Solutions and Sonic Wall. The company continues with this approach, as Brian T. Gladden stated in an analyst interview after the earnings release, "Year-to-date, we've announced 6 acquisitions and closed 5 of them, all of which will help drive a higher mix of solutions with more predictable revenue and margin streams. In the second quarter, we closed Wyse, the global leader in cloud computing -- cloud client computing, and SonicWALL, a leader in unified threat management and next-generation firewalls." Dell also announced on Tuesday that it had hired Marius Haas to be in charge of servers, networking and storage systems. Haas, who most recently worked for Kohlberg Kravis Roberts (KKR
), was formerly with Hewlett-Packard (HPQ
) in their mergers and acquisitions department but later turned their networking business into one of their biggest profit centers. While Dell is currently under pressure due to its reliance on its PC business, the company appears to be taking steps to move in other directions through its acquisitions. Despite the lower numbers and revised forecasts, Dell has overcome adversity in the volatile technology sector and could turn around as a full service IT company by Q1 of 2013. Other News About DELL Dell Hires Yet Another Superstar Executive to Save It
Dell hires former Hewlett-Packard exec Marius Haas. Dell Wyse Unveils New Products for VDI, Enterprise BYOD
Dell's Wyse releases new products including new reference architecture. Other Stocks in the News Best Buy suspends profit outlook, share buybacks
Electronics retailer gives new CEO time to formulate turnaround strategy. Apple as Most Valuable U.S. Company Ever Has Room to Grow More
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Published on Aug 22, 2012
By Jay Hawk