Dell Earnings: Here’s Why Investors are Disappointed

S&P 500 (NYSE:SPY) component Dell Inc. (NASDAQ:DELL) reported its results for the third quarter. Dell is a technology company that offers desktop PCs, software and peripherals, servers, and networking and storage services to customers worldwide.

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Dell Inc. Earnings Cheat Sheet

Results: Net income for the computers-microprocessors fell to $475 million (27 cents per share) vs. $893 million (49 cents per share) a year earlier. This is a decline of 46.8% from the year-earlier quarter.

Revenue: Fell 10.7% to $13.72 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Dell Inc. reported adjusted net income of 39 cents per share. By that measure, the company fell in line with the mean estimate of 39 cents per share. It fell short of the average revenue estimate of $14.92 billion.

Quoting Management: “We are consistently executing our end-to-end solutions strategy for the benefit of our customers,” said Michael Dell, Chairman and CEO. “In the quarter, we completed the acquisition of Quest Software which – along with other recent acquisitions like SonicWALL and Wyse – adds leading management, security, virtualization and cloud capabilities to our expanding portfolio of powerful solutions. In a difficult global IT spending environment we saw solid proof points that demonstrate progress in our strategy,” said Brian Gladden, Dell CFO. “A highlight has been the strong progress of our newly introduced servers, with our server and networking business up 11 percent. We’re also encouraged by early interest in our new Windows eight touch portfolio and the opportunities it creates for our commercial and consumer businesses.”

Key Stats:

The company has now seen net income fall in each of the last four quarters. In the second quarter, net income fell 17.8% while the figure fell 32.8% in the first quarter and 17.6% in the fourth quarter of the last fiscal year.

Revenue has dropped for three consecutive quarters. In the second quarter, revenue declined 7.5% to $14.48 billion while the figure fell 4% in the first quarter from the year earlier.

The company met estimates last quarter after topping forecasts in the previous quarter with net income of 50 cents versus a mean estimate of net income of 45 cents per share.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from 54 cents a share to 40 cents over the last ninety days. At $1.73 per share, the average estimate for the fiscal year has fallen from $1.90 ninety days ago.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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