Hard to 'Move the Needle'
But, said ISI Group's Marshall, who has a "neutral" rating on the shares, "The ship is so big that to move the needle is a Herculean feat. Expectations are way too high."
Dell, the world's third-largest PC maker, fell as low as $17.29 in extended trading a day after the missed forecast. And so far this year shares have outperformed the Standard & Poor's 500 Index, which climbed 8.3%.
Fourth-quarter net declined 18%, to $764 million, or 43 cents a share, from $927 million, or 48 cents, a year earlier. Sales rose 2%, to $16 billion, in line with analysts' estimates. Excluding some items, earnings will be at least $2.13 a share this fiscal year, Dell said.
Dell Vs. Apple
Sales in the consumer division, though fell 2% last quarter -- indicating to some that Apple Inc. is taking buyers from Dell with Apple's Mac and iPad devices. Revenue in the business that caters to governments slipped 1% amid "weakness" in purchasing by U.S. federal agencies and governments in Western Europe, Dell Inc. said.
"When do we see revenue growth for the company start to show up?" according to Abhey Lamba, an analyst at Mizuho Securities USA Inc. in New York, who initiated coverage of Dell this month with a "buy" rating. "They've been able to grow earnings because of cost management and supply-chain improvements. But you can do that for only so long. At a certain point, revenue needs to start growing or else earnings will come down," Lamba told Bloomberg.
In general, consumer purchasing is down in the current economy, as well. And those that are buying prefer iPads rather than traditional notebooks. PC shipments fell 4.9% last year, according to research firm IDC, the worst performance since 2001.
Plus, the 2011 flooding in Thailand hurt disk-drive production, and created supply disruptions likely to continue into Dell's October quarter, the company said.
Diversification Has Started Already
Dell has been diversifying beyond PCs, buying computer networking company Force 10 Networks Inc. last August, for an undisclosed price, and storage maker Compellent Technologies a year ago for about $856 million. On Feb. 2, it hired former CA Inc. CEO John Swainson to head a new software group.
According to one analyst, Dell could be scouting for a software acquisition worth $1 billion to $3 billion. Peter Misek, with Jefferies & Co., who has a "hold" rating on Dell shares, told Bloomberg that computer and data-management software makers Quest Software Inc. and CommVault Systems Inc. are possible targets. BMC Software Inc., which makes tools to manage servers, may be too large, considering its $6.4 billion market value.
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