Dismal 3Q for Dell - Analyst Blog
17 11월 2012 - 12:53AM
Zacks
Dell Inc. (DELL) delivered third quarter 2013
earnings of 39 cents per share in the third quarter of 2013, in
line with the Zacks Consensus Estimate. The quarter’s earnings
were, however, 28.0% lower than the prior year level.
The disappointing result was mainly driven by lackluster PC
business. Dell is making considerable efforts to shift its focus
from the legacy PC business to higher-margin enterprise services,
stiff competition in the hardware and software businesses is posing
the biggest challenge for the company.
Revenues
The company reported revenues of $13.7 billion in the reported
quarter, which tumbled 10.5% on a year-over-year basis. The decline
in revenue was due to lower contributions from all the business
segments.
Revenue by Segments
Large Enterprise posted revenue of $4.2
billion, down 8.0% year over year, due to pricing pressure from the
client side.
Public Revenue was $3.8 billion, down 11.0%
year over year. The company continues to witness a slump in the
U.S. Federal business. Moreover, the company witnessed significant
reduction in consumer spending in the month of October. The company
also continues to see budgetary constraints with respect to
spending by Western European governments.
Small and Medium Business revenue inched down
1.0% to $3.3 billion. Within the SMB segment, the company witnessed
Enterprise Solutions and Services growth of 15.0%, including 22.0%
growth in Services, while servers and networking grew by 16%.
Consumer Business revenue plummeted 23.0% to
$2.5 billion. Within this segment, industry growth continued in the
low-value and entry-level desktop and notebooks while the company
maintained its participation in the tablet business.
Operating Results
Gross margin in the reported quarter declined to 20.9% from
22.6% in the year-ago quarter.
Operating income for the quarter was $589.0 million or 4.3% of
revenues in the reported quarter, down 48.0% year over year, hurt
by higher rate of expenses growth than revenue.
GAAP earnings in the quarter were 27 cents per share compared
with 49 cents a share in the year-ago quarter. Excluding special
items like amortization of intangibles, severance and facility
consolidation cost, acquisition-related costs, as well as income
tax adjustments, earnings per share in the quarter came in at 39
cents versus 54 cents in the year-ago quarter.
Balance Sheet & Cash Flow
The company exited the quarter with cash and cash equivalents of
$10.9 billion, down from $11.5 billion reported in the previous
quarter. Moreover, Dell’s cash conversion cycle of negative 32
days, improved 2 days sequentially, as a result of better inventory
and receivables management.
Guidance
The company expects the global macroeconomic challenges to continue
in the fourth quarter of 2013, and hence expects revenue to grow
2.0% to 5.0% sequentially. For the full year, the company expects
EPS to be roughly $1.70 on a non-GAAP basis.
Our View
Dell reported mediocre third quarter results with earnings per
share in line with the Zacks Consensus Estimate, but revenue and
operating income taking a massive hit. Revenue across the entire
business segment declined annually.
The major issue faced by the company is the cannibalization of
the PC/notebook business. Moreover, the company is facing tough
challenges due to cut-throat competition, low business growth in
Europe and restricted spending environment. Some analysts also
expect further decline in PC shipments.
Moreover, competition faced by the company in the SMB and server
segments from players like Hewlett-Packard Company
(HPQ) and Cisco Systems Inc. (CSCO) is also a
concern.
The stock has a Zacks #4 Rank, implying a short-term Sell
rating.
CISCO SYSTEMS (CSCO): Free Stock Analysis Report
DELL INC (DELL): Free Stock Analysis Report
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