Dell Warns 1Q Earnings Will Miss Mark

Amid stiffening competition, computer maker Dell Inc. said Monday its fiscal first-quarter results will miss earnings targets, blaming the shortfall on "pricing decisions."

Amid stiffening competition, Dell Inc. said Monday its fiscal first-quarter results will miss earnings targets, blaming the shortfall on "pricing decisions."

The news sent Dell shares falling nearly 6 percent to a 52-week low.

The company said it expects to earn 33 cents per share on revenue of about $14.2 billion, compared with analysts' average estimate of 38 cents per share on revenue of $14.52 billion.

The news, released after the close of trading, sent shares of the tech bellwether tumbling nearly 6 percent.

Dell, which sells computers directly to consumers and is the world's largest PC maker, previously forecast a profit ranging from 36 cents to 38 cents per share, including stock-option costs of 3 cents, on revenue of $14.2 billion to $14.6 billion.

Dell said the shortfall from the previous guidance stems primarily from pricing decisions in the second half of the quarter that the company expects will accelerate revenue growth in the future.

During the quarter, Dell aggressively discounted some of its products as it lost ground to rivals.

In a statement, Dell CEO Kevin Rollins said the company had been "making investments in our support infrastructure and product quality" and slashing prices.

Company officials declined to comment further. Dell will report first-quarter earnings on May 18.

Market researcher Gartner Inc. said Dell saw its share of industry computer shipments decline to 16.5 percent in the first quarter of 2006 from 16.9 percent a year ago. Though Dell shipped 10.2 percent more PCs than it did in last year's first quarter, Gartner said the growth rate was Dell's slowest since the third quarter of 2001.

Dell shares fell 5.7 percent, or $1.51, to $24.93 on news of the revised guidance in late-session trading. Earlier, the stock rose 75 cents, or almost 3 percent, to close at $26.43 on the Nasdaq Stock Market. Dell shares are down nearly 12 percent so far this year, and hit a new 52-week low Monday after the bell.

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Reader Comments:

Wed, May 10, 2006 Ed Bowie, MD

Perhaps its time that we looked at why Dell's figures are down. Could it be because consumers are not willing to pay premium prices for Dell products when they can't get good tech support for those products. I think so. Dell should consider providing more tech support personnel that can ask appropriatte questions (one time only per telephone call) and provide advice other than 'reboot the system'. It would be nice to be able to understand what the tech support person is saying, also, without having a non-English to English dictionary.

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