Dell 1Q Net Income Drops 18 Percent
Posted on: Thursday, 18 May 2006, 18:06 CDT
By MATT SLAGLE
DALLAS - Dell Inc.'s net income fell 18 percent in the first quarter, missing already-reduced forecasts, as the world's largest PC maker struggled with fierce competition from rivals who have gained ground on the company's direct-sales model.
In a related announcement, the company said it will begin using chips from Advanced Micro Devices Inc. for the first time. The AMD Opteron Dual Core processors will be offered in Dell servers by year's end, marking a switch from using only chips from Intel Corp.
AMD shares soared more than 13 percent on the news.
Round Rock-based Dell earned $762 million, or 33 cents per share in the three months ended May 5, compared to $934 million, or 37 cents per share, in the year ago period.
That was short of Wall Street analysts, who were expecting 38 cents per share on revenue of $14.5 billion, according to a survey by Thomson Financial.
Last week Dell lowered its earnings projections for the quarter to 36 cents to 38 cents per share because of what it called "pricing issues."
"The competitive environment has been more intense than we had planned for or understood," Dell CEO Kevin Rollins said in a statement.
Dell, which grew into a Wall Street darling selling computers directly to businesses and consumers, said first-quarter sales rose 6 percent from the year ago period to $14.2 billion. It had previously forecast revenue of $14.2 billion to $14.6 billion.
In Thursday's report, Dell said it would no longer issue quarterly guidance and earnings per share and would instead only focus on long-term specific company and industry factors influencing performance.
Dell said it did not expect results for the second quarter to be similar to the first quarter.
The company's shares have taken a beating recently as rivals such as Hewlett-Packard Co. cut into Dell's share of the PC market.
Dell shares 3.6 percent, or 85 cents, in late-session trading on the news. Earlier, the stock rose 32 cents to close at $23.95 on the Nasdaq Stock Market. Dell shares have ranged from $23.60 to $41.99 in the past 52 weeks.
AMD shares rose $4.20, or 13.4 percent, to $35.55 in aftermarket trading, after rising 58 cents in the regular session.
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On the Net:
http://www.dell.com
Source: Associated Press/AP Online
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