Dell Calls For Powerful Replacement Cycle (DELL)

Dell Inc. (NASDAQ: DELL) has just reported earnings of $0.24  EPS on $12.342 billion in revenue.  Thomson Reuters had estimates at $0.23 EPS and $12.66 billion in sales.  The main issue is on what it expects ahead, despite no solid guidance.

Dell is not calling a massive bottom as signals are mixed about the demand environment, but the company said that it is preparing for what it believes will be a powerful replacement cycle. It noted that virtualization and managed services will play larger roles and said it is on track to reduce $4 billion in annualized costs by 2011.

Enterprise revenue fell 31% to $3.4 billion, public revenue fell 11% to $3.2 billion, small and mid-sized business revenue fell 30% to $3 billion, and consumer revenue fell 16% to $2.8 billion.

Dell did not give formal guidance ahead of the conference call, but estimates for next quarter are $0.24 EPS and $12.86 billion in revenue.  It commented about the overall environment remaining challenging and global IT-demand is mixed. But, again as the company repeated, it did note that it is positioning itself for improvements in IT spending.

This represents a revenue drop of 8% sequentially and 23% from last year.  On a net income basis after items, the drop is 17% sequentially and a sharp 63% from a year ago.

Dell shares closed up 3.2% at $11.48 on an unofficial basis and shares are trading at $11.65 in  the after-hours session; its 52-week trading range is $7.84 to $26.04.

JON C. OGG
MAY 28, 2009