Dell warns of lower revenue in Q2, blames PC market slowdown
Round Rock (TX) - Nearly four weeks prior to issuing its fiscal Q2 quarterly report, Dell has already warned of a likely revenue and earnings slowdown, with growth flattening if not taking a slight downturn. Revenue for the second quarter, the company said early this morning, could stand still at $14 billion, after reporting a $14.2 billion quarter just last May.
But the big dip could come in earnings per share (EPS), which Dell is now warning could come in the range of 21 to 23¢. If you take the overall earnings of the company, and divide that by the number of shares outstanding, the result should be how much the real value of a share of stock should grow - as opposed to its actual trading value on the exchange. Last May’s report put Q1 EPS at 33¢. It had looked bad for Dell in early morning trading, with shares plunging in value as much as 13% at the opening bell. Shares then regained most of that value by 9:45 am ET, before plunging once again, down 11% at 10 a.m.
Dell is blaming a general slowdown in the worldwide commercial PC market as the principal cause, coupled with "aggressive pricing" in a lower-demand market driving down margins. With next week’s anticipated price drop in dual-core processors perhaps precipitating a dip in system prices, a short-term bump in system sales volume actually might not help much if aggressive pricing and lower margins ensue. Dell knows this price drop is coming - in fact, for its upcoming XPS 700 revision, it’s counting on it - so this could be why a possible short-term surge in demand may not be factoring into the company’s equations.