Dell revenue to fall below analyst expectations

Quarterly revenue will fall at the low end of the range that the company provided in February as price cuts take their toll.

Tom Krazit Former Staff writer, CNET News
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Tom Krazit
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A correction was made to this story. Read below for details.

Dell expects its first-quarter revenue to come in at the low end of the range it provided earlier this year, the company announced Monday.

When it announced its in February, the company expected to record between $14.2 billion and $14.6 billion in revenue for the period ended in April. Dell now expects to record around $14.2 billion, it said in a release after the close of the stock market Monday. Earnings per share are now expected to be 33 cents per share, down from the company's previous expectations of between 36 cents and 38 cents per share. Analysts surveyed by Thomson First Call had been expecting revenue of $14.5 billion and earnings per share of 38 cents for the first quarter.

"During Q1 we continued to execute on our strategy to reinvigorate growth by making investments in our support infrastructure and product quality and by accelerating pricing adjustments," Kevin Rollins, Dell's CEO, said in the release. In the slowing PC market, Dell lost share during the first calendar quarter of the year to rivals like Hewlett-Packard.

Once a darling of the financial community, Dell's stock has slipped during the past 12 months amid . It will formally announce its earnings results next week.

Dell's problems can be traced, in part, to its strong presence in the corporate PC market, said Charles Smulders, an analyst with Gartner. The corporate market is easing back on purchases as it completes a replacement cycle that began two to three years ago. Dell is also trying to resist getting bogged down in the low end of the consumer PC market, which it blamed for poorer-than-expected results last year, he said.

But at the same time, Dell is running into the inevitable growing pains that a company of its size is bound to experience, said Bob O'Donnell, an analyst with IDC. It is trying to spur growth in new markets around the world, but some of those markets aren't as receptive to Dell's direct-sales model as others, he said.

The first quarter was solid, so any problems Dell is having appear to be confined to them, O'Donnell said. Rollins will face questions from financial analysts Thursday looking for the reasons behind the slump.

Correction: This story misstated Dell's new expectations for earnings per share during its first quarter. The company expects to record earnings per share of 33 cents, down from its previous expectations of 36 cents to 38 cents.