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Shares of the struggling personal computer manufacturer Dell (NASDAQ:DELL) have posted gains on the stock chart so far in 2013 — the stock is up close to 40 percent this year to date — but those gains have largely come as investors bid up shares based on hopes that founder and CEO Michael Dell will take the company private rather than fundamentals. Looking at the stock over a five-year period, a more realistic view, reveals that shares of Dell have lost close to 27 percent of their value as the company has struggled to fight against the changing technological trends dominating the computing industry.
Here are three reasons why Dell can’t catch a break:
The Sad State of the Personal Computer Industry
Just in case the personal computer industry did not already have enough headwinds, a new report expects shipments to decline for the second-consecutive year. Sales of desktop and portable PCs are in need of a reboot, but they will have to wait at least a little bit longer. PC shipments for 2013 are set to decline by 1.3 percent, according to the International Data Corporation Worldwide Quarterly PC Tracker.
“Growth in emerging regions has slowed considerably, and we continue to see constrained PC demand as buyers favor other devices for their mobility and convenience features,” commented Loren Loverde, Program Vice President at IDC. “We still don’t see tablets (with limited local storage, file system, lesser focus on traditional productivity, etc.) as functional competitors to PCs – but they are winning consumer dollars with mobility and consumer appeal nevertheless.”
The company’s fourth quarter earnings earnings, reported on February 19, provided a snapshot of this problem. Just because Dell reported better-than-expected results does not mean that the company somehow shrugged off the troubles that have been plaguing its business in recent years. The current technological trend has left personal computers in the dust in favor of mobile devices like tablets and smartphones, and the world’s third-largest PC manufacturer is still behind the curve. Fourth quarter earnings declined by 31 percent as revenue slide 11 percent from the year-ago quarter, pushing the company to its fifth consecutive quarterly loss.
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