Dell Computer Shares Fall
Dell Computer shares took a pounding Wednesday after the computer maker's sales weren't as high as most on Wall Street hoped.
Dell posted a fourth-quarter profit of $425 million, or 31 cents a share. Dell earned $285 million, or 20 cents a share, the same period a year ago.
Dell (DELL) also set a 2-for-1 stock split, its seventh in seven years. The stock will split March 5, with every stockholder on Feb. 26 getting two shares for every share they hold.
While Dell's sales rose 38 percent, the total revenue of $5.17 billion didn't live up to what most analysts expected.
Shares plunged 7 3/16 to 81 9/16 Wednesday on volume of 112 million shares. It normally trades 20 million.
Concern over the revenue shortfall began to surface late last week.
BancBoston Robertson Stephens analyst Daniel Niles lowered his sales estimate Friday, projecting revenue would come in at $5.2 billion vs. his previous expectations of $5.5 billion. Those cautious comments triggered a big selloff in the stock.
In a note to clients Friday, Niles said competition could have heated up during the fourth quarter, particularly in the corporate computing arena.
Credit Suisse First Boston estimated sales would be about $5.4 billion, or 45 percent higher than the year-ago period.
In a conference call with analysts, Dell executives said the company landed some orders later during the quarter than they expected. That will push some revenue numbers into the first quarter.
As a result, Dell's Chief Financial Officer Thomas Meredith said Dell has its "strongest pipeline of future growth" heading into the first quarter.
Meredith said first-quarter revenue should grow in the mid-single-digit range, but analysts questioned why sales won't grow with increased orders.
Meredith said mid-single-digit growth would still be a "significant achievement," and that the company doesn't have a "perfect vision" into spending surrounding Y2K worries.
He did not detail specific steps the company might take to achieve better productiveness, but said, "Dell is well positioned for continued industry-leading growth in the coming year."
Michael Dell, chairman, chief executive and founder of the Wall Street darling, insisted "It's going to be another very strong year for Dell."
Dell echoed Meredith's comments, contended there's a 60- to 90-day lag for products to show up as revenue, which has pushed some sales into the first quarter. He expects Dell to continue outperforming the computer market throughout 1999.
In a statement issued before the conference call, Dell said the industry "remains highly competitive, underscoring the need for greater operational efficiencies."
Dell's 1999 per-share profit of $1.05 was a penny below what analysts projected the company would make. Dell's total profit was $1.46 billion vs. $944 million, or 64 cents a share, in fiscal 1998.
Revenue for the year was $18.24 billion vs. fiscl 1998 sales of $12.33 billion.
Written By Tiare Rath, CBS MarketWatch