Dell lowers Q1 revenue and investor confidence

Cutting prices for a brighter tomorrow

By Ashlee Vance in Mountain View • Get more from this author

Posted in Financial News, 8th May 2006 21:09 GMT

Dell today cut its first quarter revenue forecast, and pledged that price cuts would revive sales.

Dell now expects first quarter revenue to come in at $14.2bn, which is at the lowest possible end of a previous forecast of between $14.2bn and $14.6bn in revenue. The earnings miss comes as a result of price cuts that will "accelerate revenue growth in the future," according to the company.

Analysts had once been expecting revenue of $14.7bn from Dell. They, however, lowered their forecasts after Dell warned that it would likely churn out single-digit growth in the coming months.

The single-digit line is a hard one for Dell fans to swallow. They've watched the company make double-digit revenue and market share gains during the glory days and during the dot-com bust that rattled other major hardware makers.

Dell continues to be hampered by a dependence on its low-margin PC business. In addition, its Intel-only stance has cut Dell off from the healthiest part of the x86 server market, which is for gear based on AMD's Opteron chip.

"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," Dell CEO Kevin Rollins said.

Investors did not reciprocate Rollins' optimism, sending Dell shares down six per cent in the after-hours market as the revenue miss was made public. ®

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