PC maker Dell Inc. (DELL: Quote) said Tuesday after the markets closed that its second quarter profit fell 18% from last year, as revenue declined and margins deteriorated amid weak consumer demand.
However, the company's quarterly earnings per share, excluding items, came in above analysts' expectations, but its quarterly revenue fell short of analysts' forecast.
At the same time, the company gave a downbeat revenue guidance for the third quarter and cut its full year earnings outlook.
Dell shares are currently losing 4.21% in after hours trading after closing the day's regular trading session at $12.34, down 22 cents or 1.75%. The shares trade in a 52-week range of $11.39 to $18.36.
Lower revenue and weaker margins weighed heavily on Dell's earnings. Gross margin for the quarter narrowed to 21.6% from 22.5% a year earlier, while operating margin shrank to 6.2% from 7.3% last year. On an adjusted basis, gross margin for the quarter narrowed to 22.6% from 23.2% a year earlier, while operating margin shrank to 7.8% from 8.5% last year.
Region wise, the company's Amercas revenue fell 6% year-over-year in the second quarter, while Europe, Middle East and Africa revenue declined 7% and Asia-Pacific and Japan revenue slipped 12%. Revenue from the so called emerging markets - Brazil, Russia, India and China - dropped 15%.
The company's desktop PC revenue for the second quarter fell 9% to $3.40 billion, while its mobility revenue, which includes laptop PCs, dropped 19% to $3.87 billion.
Last month, two industry research firms International Data Corp. (IDC) and Gartner Inc. (IT) said that global PC shipments in the second quarter of 2012 were down 0.1% from last year, as the popularity of latest smartphones and media tablets continued to hit PC demand.
In the third quarter of 2011, China's Lenovo overtook Dell to become the world's second largest PC vendor for the first time and continues to maintain that position. Dell had lost the global PC lead to Hewlett-Packard Co. (HPQ) in 2006.
Dell's software and peripherals revenue for the second quarter fell 9% from last year, while server and networking revenue for the quarter rose 14%.
Dell is the world's third largest maker of server computers behind International Business Machines Corp. (IBM) and HP.
Services revenue for the second quarter increased 3% year-over-year, boosted by the acquisition of Perot Systems, while storage revenue fell 13% from a year earlier.
For the second quarter, large enterprise revenue fell 3% year-over-year, while public revenue slipped 6%. Small and medium business revenue for the quarter declined 1%, while consumer revenue dropped 22%.
Dell also said Tuesday that Marius Haas has joined the company as president of Enterprise Solutions, responsible for worldwide engineering, design, development and marketing of Dell enterprise products, including servers, networking and storage systems. Haas joins Dell from Kohlberg Kravis Roberts & Co. L.P. (KKR). Before that Haas held a number of leadership roles at rival HP, Compaq and Intel Corp. (INTC).
For the second quarter ended August 3, 2012, Dell reported net income of $732 million or $0.42 per share, compared to $890 million or $0.48 per share for the year-ago quarter.
Excluding items, adjusted net income for the second quarter fell to $875 million or $0.50 per share from $1.01 billion or $0.54 per share in the prior year quarter.
On average, 28 analysts polled by Thomson Reuters expected the company to earn $0.45 per share for the second quarter. Analysts' estimates typically exclude special items.
Revenue for the second quarter fell 8% $14.48 billion from $15.66 billion in the same quarter last year. Twenty-seven analysts had a consensus revenue estimate of $14.65 billion for the second quarter.
Given the uncertain economic environment, competitive dynamics and soft consumer business, Dell said it expects third quarter revenue to be down 2% to 5% sequentially, implying revenue of $13.76 billion to $14.19 billion. Analysts currently expect the company to post revenue of $14.86 billion for the third quarter.
Additionally, the company said was modifying its full year adjusted earnings outlook to at least $1.70 per share, which includes a 2-to-3 cent dilutive impact from its pending acquisition of Quest Software. In February, the company had said it expected fiscal 2013 adjusted earnings per share to exceed the record $2.13 it delivered in fiscal 2012. Analysts currently expect the company to earn $1.91 per share for the fiscal year 2013.
Dell was among the worst sufferers among the technology giants during the recession In order to drive growth, Dell resorted to acquisitions, cut thousands of jobs, closed plants and entered the smartphone market.
Of late, Dell is acquiring or has signed deals to acquire small companies to expand its business. After losing the takeover battle for data storage firm 3PAR Inc. to larger rival HP, Dell acquired Compellent Technologies, Inc. last year. In August 2011, Dell completed its acquisition of security software maker Force10 Networks.
In 2012, Dell has completed the acquisitions of AppAssure, Clerity Solutions, SonicWALL, Inc and Wyse Technology Inc.
Early last month, Dell agreed to buy Quest Software, Inc. (QSFT) in an all-cash deal of about $2.4 billion, net of Quest's cash and debt, outbidding private equity firm Insight Venture Partners. Dell expects to close the acquisition in the second half of the third quarter.
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by RTT Staff Writer
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