The Associated Press May 23, 2012, 3:30PM ET

Dell shares fall on disappointing 1Q, outlook

Dell Inc.'s shares fell sharply in trading Wednesday after the computer maker reported disappointing fiscal first-quarter financial results and gave a weak sales forecast for its second quarter.

THE SPARK: Dell reported that its profit fell 33 percent for its first quarter on weak sales to consumers, businesses and the public sector.

It earned 43 cents per share on an adjusted basis on revenue of $14.42 billion for the period. That fell short of the 46 cents per share on revenue $14.91 billion that analyst polled by FactSet were anticipating.

Dell also said that it expects its revenue of roughly $14.71 billion to $15 billion for its second quarter, below the $15.44 billion that analysts had forecast.

THE BIG PICTURE: Dell's report furthered concerns that the technology sector's recovery will be long and slow.

Dell's personal computers sales have softened as consumers have cut back their spending or opted to buy smartphones and iPads instead. The Round Rock, Texas, company is also struggling with mixed results in its sales directly to businesses and the public sector as the tough economy has caused these customers to curb spending.

This has furthered concerns that Dell, Hewlett-Packard Co., Cisco and other bellwether technology companies may be dealing with slow or volatile sales trends.

Cisco issued a sobering forecast earlier this month for the current quarter -- typically the company's busiest period -- that raised fears of what impact the economy is having on the technology sectors. And shares of Hewlett-Packard Co. fell Wednesday following Dell's report and ahead of its own earnings report that is expected after the market closes.

THE ANALYSIS: Sterne Agee's Shaw Wu said the weaker-than-expected results were a surprise given the market's already low expectations. He noted that for the first time, Dell acknowledged that it's facing competition from alternative devices such as smartphones and tablets made by companies like Apple Inc.

"We are frankly not surprised as we have said in the past our belief that consensus was underestimating the competitive impact from Apple in both small and medium-sized business and enterprise markets," Wu wrote in his note to investors.

Yet Wu and other analysts showed some optimism that Dell's focus on building its server and service business could benefit the company in the long run. Wu, who has a "Neutral" rating on the stock, reduced revenue and earnings-per-share estimates for fiscal 2013.

SHARE ACTION: Dell's shares fell $2.63, or more than 17 percent, to $12.45 in afternoon trading. That is down nearly a third from its 52-week high of $18.36 set in mid-February.


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