Dell issues weak forecast, shares slide
Dell Inc warned of a "challenging" second half as customers cut back on computer purchases in anticipation of the launch of Microsoft Windows 8 software late in 2012, sending its shares down 3 percent.
On Tuesday, the No. 2 U.S. PC maker forecast revenue would slide 2 percent to 5 percent in the fiscal third quarter from the second, translating to a range of $13.8 billion to $14.2 billion. That lagged Wall Street's target of $14.85 billion.
"People had already expected them to take down numbers, but I think the level to which they are taking down numbers is pretty severe compared to expectations," said Cross Research analyst Shannon Cross.
Dell Chief Financial Officer Brian Gladden said in an interview that the company has tempered its outlook for the fiscal third quarter partly because it expects distributors to hold off on purchasing new computers from Dell before the October release of the latest version of Microsoft Corp's Windows operating system.
Microsoft will launch a highly anticipated version of Windows designed for tablets that analysts say give PC makers like Dell, Hewlett-Packard Co and Lenovo Group Ltd a chance to win back market share lost to Apple Inc's iPad.
"The jury is out as to whether they will be able to improve their growth rates until they get some Windows 8 tablets out," Cross said.
The company reported fiscal second-quarter revenue of $14.5 billion, below the $14.64 billion analysts had expected on average, according to Thomson Reuters I/B/E/S.
The company's stock fell to $11.98 in after-hours trade. They had closed at $12.34 on the Nasdaq.
Dell, founded by Chief Executive Michael Dell, is in the midst of a turnaround, juggling acquisitions with the need to fatten margins by trimming expenses even as global tech spending appears to be slipping.
Once the world's top PC maker and a mainstay of business-school case studies, Dell has been losing market share and now has to contend with Asian PC makers like Acer Inc and Lenovo.
In May, it warned that global tech spending is weakening faster than anticipated.
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