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Dell Guidance Suggests PC Weakness Endures: Pro Traders

Tuesday, 22 May 2012 | 5:37 PM ET

“They’re going to update guidance in August. That’s not good.”

That was Fast trader Joe Terranova’s immediate reaction to earnings from Dell which came in weaker than expected.

Largely Dell cited weakness among consumers as well as businesses in Europe and India as the main catalysts. Sales to consumers slipped 12 percent to $3 billion. Sales to large corporations declined 3 percent to $4.4 billion. Dell said it’s seeing caution about buying in the uncertain growth environment.

“If they were confident that the headwinds (facing PC sales) were temporary they would have tackled that guidance issue," adds Terranova.

But they didn’t. That suggests to Terranova that Dell expects headwinds will remain at least another quarter.

“Now, I think analysts will revise Dell lower because they’re not updating guidance until August.” That should drag shares lower.

However, there may be a saving grace.

Dell Drops 11%
Dell earnings disappoint on both top and bottom lines, with CNBC's Jon Fortt and Peter Misek, senior tech analyst at Jefferies & Co.

Trader Tim Seymour says the after hours decline makes the stock cheap. "Dell is trading near its lows of August 2011," he says.

Seymour thinks value investors may step in. However, he adds the question becomes whether it’s a value trade or value trap.

Looking at the numbers, Dell said revenue in its fiscal first quarter declined 4 percent to $14.4 billion, lower than the average analyst estimate of $14.9 billion according to Thomson Reuters I/B/E/S.

The company posted net income of $635 million, or 36 cents a share, down from $945 million, or 49 cents a share, a year earlier.

For the second quarter of fiscal 2014, the company estimated revenue would rise 2-4 percent from first-quarter levels.

sales to consumers took a big hit with consumer revenue slipping 12 percent to $3 billion. Sales to large corporations declined 3 percent to $4.4 billion.


Posted by CNBC's Lee Brodie

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Trader disclosure: On May 22, 2012 , the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Keith McCullough is long GLD; Keith McCullough is long TLT; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long PNC; Joe Terranova is long SBUX; Joe Terranova is long SJM; Joe Terranova is long UPL; Joe Terranova is long AAPL; Joe Terranova is long CNX; Joe Terranova is long LQD; Tim Seymour is long BAC; Tim Seymour is long CSCO; Tim Seymour is long SBUX; Tim Seymour is long FB; Tim Seymour is long BTU; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MO; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long XLU; Steve Grasso is long ZAZA; Mike Murphy is long TOL ; Mike Murphy is long PEP; Mike Murphy is short JPM

For Chuck Akre
The Akre Focus Fund is long MA
The Akre Focus Fund is long ROST
The Akre Focus Fund is long AMT
The Akre Focus Fund is long DLTR
The Akre Focus Fund is long MCO
The Akre Focus Fund is long AMTD
The Akre Focus Fund is long V
The Akre Focus Fund is long TJX
The Akre Focus Fund is long LPLA
The Akre Focus Fund is long LAMR

For Jeff Kilburg
Jeff Kilburg is long FB

For Peter Misek
Jefferies Group, Inc. makes a market in the securities or ADRs of Dell.

For Nick Einhorn
Nothing to disclose



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