Shares of Dell suffered their biggest single-day fall since the collapse of the dotcom bubble yesterday after the world's biggest PC maker said sales and earnings would fall short of expectations in the second quarter. The news capped a grim week for technology stocks.
Kevin Rollins, Dell's chief executive, said "aggressive pricing" had led to a decline in profitability at the company, which has been struggling to right itself for more than a year amid increased competition from low-cost rivals and a drop in sales growth.
Andrew Neff, analyst at Bear Stearns, said he saw "potential for change" among senior management as the company struggles to get back on track: "Either [ Mr Rollins] has to fix it or they have to get a new guy in charge."
Dell's shares hit a five-year low yesterday, falling almost 14 per cent to $19.02 (€15.07). The shares have fallen more than 50 per cent over the past 12 months.
The company blamed the disappointing outlook on discounting in a softening market for computers. The result, it said, would be second-quarter earnings of 21 cents to 23 cents a share on revenue of about $14 billion.
Dell employs more than 4,000 people at its manufacturing plant in Limerick and its sales operation in Dublin.
The company, whose sales have slowed in recent quarters amid tough competition from Hewlett-Packard and complaints about poor after-sale services, had been expected to earn 32 cents a share on revenue of $14.2 billion.
"Dell, they are having problems because internally they are in disarray," said Eric Ross, an analyst at ThinkEquity Partner, who has a "sell" rating on the stock. "Dell has done an amazing job of growing, but they don't know how to retrench very well. Inside Dell, they don't know where to turn."
Rather than its own problems, Dell pointed to broader industry challenges as the reason for its earnings warning. Analysts said those issues could indeed bite rivals like HP, whose stock fell 3.5 per cent.
But they also said any industry troubles would hurt Dell more than others, exacerbating problems that have already caused the company to post disappointing revenue in four straight quarters.
"Our take is that Dell's miss is largely about Dell, although it does add yet another reaffirmation about the state of the commercial PC market, mostly in desktops," said Goldman Sachs analyst Laura Conigliaro.
Dell said in a statement yesterday that while it "is seeing positive results and will continue to invest to drive a superior customer experience," the lowered outlook reflects "aggressive pricing in a slowing commercial market worldwide".
A Dell spokesman said "commercial" did not refer to any particular segment of the market - in other words, it does not point simply to the business or personal computer market. Rather, it indicates the global computer market has slowed.
