Dell Fails To Impress (DELL, HPQ, AAPL)

Dell Inc. (NASDAQ: DELL) reported earnings after the close, and shares are retreating away from any endorsement of Dell over rival Hewlett-Packard Co. (NYSE: HPQ).  The PC-maker said earnings were 0.22 GAAP EPS but $0.30 non-GAAP EPS. Revenue was up 21% at $14.9 billion.  Thomson Reuters estimates were $0.27 EPS (non-GAAP) and $14.27 billion in revenues. Cash flow from operations was $238 million for the quarter.

For whatever it is worth, Dell better just be glad that Apple Inc. (NASDAQ: AAPL) is having trouble supplying iPads to meet the demand.  Based on how the stock is reacting, there is some fear that more competition is not a good thing.  If nothing else, Dell is just not sounding positive enough.

The company noted that servers, storage and services revenues grew a combined 38% to $4.2 billion of the total revenues.  The company also noted that Perot Systems helped in an improving business environment.  The company also noted that it has resumed its stock buyback program during the quarter and that it spent $200 million to repurchase stock.

What sounds important is that the release says Dell believes “it is seeing the early stages of a corporate IT refresh.”  It notes that commercial demand is continuing to build with optimism that the trend will continue throughout the year.

As far as loose guidance, Dell expects seasonal improvements from its state and local government, consumer and education businesses in the second quarter. Here is the kicker and the “BUT” in the release… The second quarter and the first part of the third quarter typically experience slower demand from larger commercial customers in the U.S. and Europe.  While that is true, many businesses have been more optimistic.   On that front, Dell said it expects a normal, seasonal sequential demand pick-up “in the low single digits” and also noted that it expects some components to remain in tight supply for the next couple quarters and some volatility in global currencies.

The breakdown in revenue growth is somewhat interesting, and shows more and more on the enterprise side than the public side of the business.  Large enterprise revenue was up 25% to $4.2 billion; Public revenue was up 22% to $3.9 billion; Small and Medium Business revenue was up 19% to $3.5 billion; and Consumer revenue was up 16% to $3.2 billion.

Dell shares closed down 4.4% at $14.32 on a very weak market.  Unfortunately the stock is not getting back any of its losses.  Shares are down another 5% at $13.58 in the after-hours reaction versus a 52-week range of $10.59 to $17.52.

JON C. OGG