Dell warns that Q4 earnings will be below expectations

Dell Computer Corp. today became the latest technology vendor to issue a financial results warning, disclosing that profits in its fiscal fourth quarter will be about 33% less than expected.

Earnings for the quarter ending Feb. 2 are now likely to total 18 to 19 cents per share, instead of the 26 cents per share that Dell had been forecasting. The computer maker said revenue should come in between $8.5 billion and $8.6 billion -- up about 25% from last year's fourth quarter, but below the $8.7 billion level that Dell had expected to reach.

Round Rock, Texas-based Dell attributed the earnings shortfall to "deterioration in global economic conditions and overall demand for computer systems and services." In a statement, CEO Michael Dell said the company plans to continue to aggressively manage its internal cost structure during its next fiscal year as a result of the fourth-quarter showing.

Dell is one of many computer, software and semiconductor makers that have either already reported weaker-than-expected financial results or warned that their numbers will be below plan. For example, Microsoft Corp. last week reported results for its second fiscal quarter that were in line with a reduced-expectations warning it issued last month (see story).

Also last week, Apple Computer Inc. disclosed a $195 million quarterly loss on revenue that was $600 million below its original expectations (see story). And vendors such as Hewlett-Packard Co., Compaq Computer Corp. and NCR Corp. have all said their financial results won't meet earlier projections, due partly to slowdowns in sales to corporate users (see story).

PC makers have been hit especially hard. Earlier this month, Gateway Inc. said it plans to cut its workforce of 20,000-plus employees by more than 10%, after suffering a $94.3 million fourth-quarter loss (see story). IDC, a market research firm in Framingham, Mass., today estimated that PC unit shipments fell 0.3% year-to-year in the fourth quarter and were down 3.6% from their third-quarter levels.

"Fears about the slowing U.S. economy clearly cut consumer demand in the latter half of the final quarter in 2000," said IDC analyst Roger Kay in a statement. "Moreover, a lack of compelling reasons to buy kept the commercial segment from making up the difference." Total shipments are likely to top out at 36.7 million PCs, according to Kay.

Despite Dell's warning about its fourth-quarter results, IDC predicted that the company extended its unit-shipment market share lead over Houston-bassed Compaq during the last three months. Dell ended last year with a 22.3% share of the PC business, compared with 15.3% for Compaq and 12.4% for HP, IDC said.

In its announcement, Dell said its fourth-quarter shipments are still expected to increase by more than 40% from the same period a year ago. Michael Dell, who is also the company's chairman, said, "[That] clearly distinguishes us from other computer systems companies, given [the] current realities of the global economy and computer systems market."

This story, "Dell warns that Q4 earnings will be below expectations" was originally published by Computerworld.

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