Dell (DELL) Sinks 10% Following Earnings Shortfall, Lower Gross Margins
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Price: $464.78 +0.21%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.7%
EPS Growth %: +109.9%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.7%
EPS Growth %: +109.9%
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Shares of Dell (Nasdaq: DELL) are 10% lower this AM after failing to deliver on its Q2 earnings report, due to lower gross margin. Dell also warned that conservatism in IT spending is spreading to Western Europe and Asia.
After the close, Dell reported EPS of $0.31, which included expenses, and while not comparable, was clearly lower than the analyst consensus of $0.36. Revenues rose 11% to $16.4 billion, nicely above the consensus of $15.95 billion.
Dell said gross margins were adversely affected by actions to drive growth in strategic areas like Global Consumer and EMEA, as well as an increase in deferred revenue from the sale of successful service offerings in EMEA, which will be recognized in subsequent periods. Dell reported Q208 gross margin of $2.83 billion, versus $2.95 billion gross margin reported in last year's Q2, even though revenues were nearly $1.7 billion higher in this year's Q2. Gross margin as a percentage of total net revenues fell to 17.2% from 19.9% last year and 18.4% reported in Q1.
Commenting on its outlook, Dell said it sees continued conservatism in IT spending in the U.S., which has extended into Western Europe and several countries in Asia. Dell also said it will continue to incur costs as it realigns its business to improve competitiveness, reduce headcount and invest in infrastructure and acquisitions. Dell noted that demand also is impacted by currency fluctuations. Dell said it will continue to benefit from improving performance in areas such as emerging countries, notebooks, and enterprise and services, which collectively are driving a more diversified portfolio of geographies and products.
Dell ended the quarter with $9.5 billion in cash and investments and weighted average shares were 2 billion, a 12 percent reduction. The company spent $1.4 billion to repurchase 60 million shares of stock.
On the bright side, sales in BRIC (Brazil, Russia, India, China) countries rose 41% on a 46% increase in units. BRIC now accounts for more than 9% of Dell's revenue. Approximately 47$ of Dell's overall revenue came from outside the U.S. in the quarter.
After the close, Dell reported EPS of $0.31, which included expenses, and while not comparable, was clearly lower than the analyst consensus of $0.36. Revenues rose 11% to $16.4 billion, nicely above the consensus of $15.95 billion.
Dell said gross margins were adversely affected by actions to drive growth in strategic areas like Global Consumer and EMEA, as well as an increase in deferred revenue from the sale of successful service offerings in EMEA, which will be recognized in subsequent periods. Dell reported Q208 gross margin of $2.83 billion, versus $2.95 billion gross margin reported in last year's Q2, even though revenues were nearly $1.7 billion higher in this year's Q2. Gross margin as a percentage of total net revenues fell to 17.2% from 19.9% last year and 18.4% reported in Q1.
Commenting on its outlook, Dell said it sees continued conservatism in IT spending in the U.S., which has extended into Western Europe and several countries in Asia. Dell also said it will continue to incur costs as it realigns its business to improve competitiveness, reduce headcount and invest in infrastructure and acquisitions. Dell noted that demand also is impacted by currency fluctuations. Dell said it will continue to benefit from improving performance in areas such as emerging countries, notebooks, and enterprise and services, which collectively are driving a more diversified portfolio of geographies and products.
Dell ended the quarter with $9.5 billion in cash and investments and weighted average shares were 2 billion, a 12 percent reduction. The company spent $1.4 billion to repurchase 60 million shares of stock.
On the bright side, sales in BRIC (Brazil, Russia, India, China) countries rose 41% on a 46% increase in units. BRIC now accounts for more than 9% of Dell's revenue. Approximately 47$ of Dell's overall revenue came from outside the U.S. in the quarter.
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