Wall Street: Dell playing it safe
Analysts view the third-quarter profit warning as good news--evidence that the PC maker is maintaining the cautious stance that lets it meet estimates while rivals struggle.
Though investors sent shares down $2.38, or 9 percent, to $23 at market close Friday, analysts maintained their ratings and said the long-term picture for the PC maker is still rosy.
CNET's PC Hardware index was down about 2.5 percent Friday, as two of its competitors declined: Gateway fell 14 cents to $10.10, and Hewlett-Packard, which also reported its quarterly results Thursday, lost 8 cents to $24.05. Compaq Computer was up 12 cents to $14.11.
After the bell Thursday, Dell managed to hit targets despite slowing sales. The company reported a profit of $433 million, or 16 cents per share, on sales of 7.61 billion, roughly flat with last year's $7.67 billion.
First Call had predicted second-quarter profits of 16 cents a share on sales of $7.7 billion.
But the computer maker also said revenue for the third quarter will be down 5 percent from the second quarter, and earnings will be between 15 cents a share to 16 cents a share. First Call had been expecting the company to earn 17 cents a share. The warning was already expected on Wall Street, though some analysts expressed surprise at its magnitude.
Dell has been in a price war with Gateway and Compaq as demand for PCs continues to wane. Analysts said they see no end to the price battle in sight, which will continue to dent sales. But analysts also said Dell appeared to be winning, based on an increase in market share.
"The real take-away (of Dell's report) was that the company continued to gain market share at an impressive clip while at the same time maintaining its profit levels in a weak environment," said Merrill Lynch analyst Steven Fortuna, who maintained a "buy" rating. "Dell outperformed the industry across all geographic and product segments."
Separately, Dell also said Friday morning that 600 employees in Europe have been laid off during the past quarter as part of its plan to shed 3,000 positions.