Dell Scores One... Early (DELL)

Dell Inc. (NASDAQ: DELL) has reported earnings.  The PC-giant posted earnings of $0.24 EPS and $12.76 billion in revenues.  Thomson Reuters had estimates for the former PC-leader at $0.23 EPS and $12.59 billion in revenues. While the earnings report was going to be key, there were several other considerations.

This actually translates to a drop in revenues of a sharp 22% and a drop in earnings per share of 23%. Shipments were up 10%, cash flow was $1.1 billion, and it ended with some $12.7 billion in cash and equivalents.   Gross margin was 18.7% of revenue.

Michael Dell has at least some optimism here.  He said, “… If current demand trends continue, we expect revenue for the second half of the year to be stronger than the first half. We are expanding our capabilities in enterprise technology and services and investing in our core business to distinguish Dell both with customers and in operating performance.”

No formal guidance was given.  The guidance for the third quarter is for seasonal demand improvements from the consumer and U.S. federal government businesses, but the company also noted how the quarter is also generally a period of slower demand from large commercial customers in the U.S. and Europe.

Dell said it believes a refresh cycle in commercial accounts is more likely to occur in 2010, with IT spending improving first in the U.S.

As far as the overall picture, the company continues to see pressure in the form of component costs and areas of aggressive pricing in the near term.

If it offers formal guidance in the conference call, the Thomson Reuters estimates for next quarter are $0.26 EPS on $12.86 billion in revenues.

As a reminder, this one has run severely already in recent weeks.  Analysts had an average target of $14.75 to $15.00 before earnings.  For this run to continue, we either have to see analysts upgrade shares or raise their targets.

Dell’s earnings came out a couple minutes before the closing bell today, an unusual event.  Shares ran up and the unofficial closing price was a gain of 6.7% at $15.65.  The after-close trading has the stock at $15.55 on heavy trading.  The 52-week range is $7.84 to $26.04.

JON C. OGG
August 27, 2009