As it tries to remake itself into an enterprise company, Dell is still being hurt by weak PC sales.Dell’s second-quarter earnings slumped 18%, thanks to weaker revenue in its consumer business.
Consumer revenue was $2.6 billion, a 22 per cent decline.
Dell reported overall quarterly revenues of $14.5 billion. This was a 7.5% decline from the year-ago period. Analysts expected $14.7 billion.
Dell’s GAAP earnings per share was 42 cents. Excluding one-time charges, non-GAAP EPS was 50 cents per share. Analysts expected 45 cents EPS.
And the company had more bad news for investors. It lowered its revenue forecast for next quarter and downgraded its full-year guidance. Dell expects third-quarter revenue to decline 2% to 5% over the year-ago quarter. That’s a range of $13.76 billion to $14.19 billion, reports the Wall Street Journal. Dell now expects full-year earnings of at least $1.70 a share, down from over $2.13.
It is surprising that Dell missed its numbers. Expectations were low, Sterne Agee analyst Shaw Wu said in a research note yesterday. Analysts were only looking for “a very modest 6% Y/Y decline in revenue and 16% Y/Y decline in EPS. Moreover, our supply chain checks indicate better tone in enterprise and SMB markets.” Wu expected those businesses to make up for Dell’s weakening consumer business.
Wu remains concerned that Dell isn’t doing enough. “Despite efforts to grow beyond a PC company with multiple acquisitions over the past few years, we estimate 65%-70% of its business is still tied to PCs including peripherals, software, and services. We still believe Dell needs to take bolder, more aggressive steps to reinvent itself.”
But there’s plenty evidence that Dell will succeed with its transformation. For one, it’s sitting on a boatload of cash: It ended the quarter with $14.6 billion in cash and investments, it said.
That’s important because Dell is spending like mad on big acquisitions to push itself into the enterprise. It’s announced six acquisitions this year so far and closed five. It entered into a bidding war for the sixth one, Quest Software and eventually struck a deal to pay $2.4 billion to get it. It expects it to close in the third quarter. Quest will bring in about 100,000 enterprise customers, plus it generated $857 million in sales and $44 million net profit last year.
Dell also pointed out that revenue in its high-margin enterprises units is growing, including networking, services, and storage.
Plus, its pretty hard to count Michael Dell out. He’s determined to transform his company.
“I’ve been doing this for 28 years and I’d like to be doing it for many more years to come,” he said last month.