Dell has missed analyst estimates for its second-quarter revenue, citing a decrease in average selling prices.
Second-quarter revenue was $13.4 billion, up 15 per cent from revenue of $11.7 billion last year but lower than analyst estimates of $13.7 billion in revenue, as polled by Thomson First Call.
Dell had lower average selling prices during the quarter than it had hoped for, said Kevin Rollins, Dell CEOI, in a press release Thursday.
Dell basically sold more low-margin PCs in the US than it had expected or wanted, Rollins said in a conference call following Dell's announcement. This was the result of poor execution on Dell's part, he said, since PC shipments were actually stronger than expected during the quarter.
"We got a bit more aggressive than we needed to," Rollins said. The company should have been more aware of its pricing strategies at the low end of the PC market and held the line on price decreases, he said.
"We'll pay a lot more attention to upselling, selling to the more profitable price points [in the third quarter]," he said.
Income hit $1.02 billion
Sales to the US government also were lower than the company had forecasted going into the quarter, Rollins said. As a result, Dell issued modest guidance for the third quarter, saying it expects revenue to fall between $14.1 billion and $14.5 billion and earnings per share between $0.39 and $0.41.
Net income, according to generally accepted accounting principles, was $1.02 billion, up 28 per cent from net income of $799 million in last year's second quarter. This works out to earnings per share of $0.41, but that figure includes a tax benefit of $0.03 per share related to a previously disclosed tax benefit from the repatriation of earnings allowed by the American Jobs Creation Act of 2004.
Without the tax benefit, earnings per share were $0.38, in line with the estimates of analysts surveyed by Thomson First Call.
Despite the lower-than-expected revenue, Dell's shipment totals grew faster than the rest of the industry, Rollins said. The company believes it grew its market share by 3 per cent in server shipments. It also grew its revenue outside the US, its traditional stronghold, by 24 per cent during the quarter.
By the numbers
Dell's revenue from Europe, the Middle East and Africa grew 21 per cent compared to last year, while revenue from Asia-Pacific and Japan increased 24 per cent.
PCs still make up the majority of Dell's revenue. Shipments of mobility products, such as notebooks and personal digital assistants, were up 47 per cent. PC customers are increasingly choosing notebooks over desktops when shopping for a new model, a trend that was behind the strong growth in mobile products, according to Dell.
Desktop shipments increased 17 per cent, the company said.