Dell could be facing one of its worst ever quarters, the company warned yesterday.
Dell is warning that it will miss its third quarter revenue targets, citing lower-than-expected sales, and a $450 million restructuring and replacement charge.
Revenue for the company's third quarter, which ended last Friday, will be about $13.9 billion, the company warned. In August, Dell predicted third-quarter revenue would fall between $14.1 billion and $14.5 billion. The shortfall was due to missed sales targets in the company's US and UK businesses.
This will be the second straight quarter that Dell has missed its goals for quarterly revenue. Last quarter, CEO Kevin Rollins said the company failed to convince customers to upgrade their cheaper desktops to more profitable systems.
Dell will have to take a $300 million charge in the third quarter to account for the cost of replacing motherboards on some of the company's GX270 and GX280 Optiplex desktop PCs. The company will send field service technicians out to customers whose systems have motherboards which were not replaced.
The remainder of the $450 million charge will cover the cost of ending leases on certain Dell facilities in and around the company's Round Rock, Texas, headquarters, excess parts for systems which the company does not believe it can sell, and some layoffs.
Most of the affected workers were from Texas or the UK.
Even excluding the effects of the $450 million charge, Dell's third-quarter earnings per share will fall at the low end of previous expectations. Earnings per share are now expected to be $0.39, the low end of the range forecast given by the company in August.
Dell will report its earnings on November 10.