Dell Margins Miss, Plagued by Supply Shortage

Dellreported an adjusted profit that topped analysts' expectations, but shares of the company fell as its gross margin fell short of forecasts and the computer maker warned that it expects components supply to remain tight.


Dell also appeared to temper expectations for the rest of the year, saying that the second quarter and early part of the third quarter "typically experience slower demand from larger commercial customers in the U.S. and Europe."

Dell's adjusted gross margin rose to just 17.6 percent from 17.4 percent in the previous three months. The market had expected 17.7 percent, according to Thomson Reuters I/B/E/S.

"They delivered on revenue, but the Street was expecting a stronger margin recovery," said Ashok Kumar, analyst at Rodman & Renshaw, adding that Dell could continue to see pressure on its margin due to high component costs.

The company reported an adjusted profit of 30 cents a share in the first quarter, against 25 cents a share this time last year.

Sales for the most recent quarter rose to $14.87 billion, up from $12.34 billion.

Wall Street was looking for a profit of 27 cents a share on revenue of $14.27 billion from the company, according to a consensus estimate compiled by Thomson Reuters.

Shares initially reacted to the earnings news by gaining slightly, but was later down about 4 percent. Get after-hour quotes for Dell here.

Dell's net profit for the quarter that ended April 30 was $441 million, or 22 cents a share, compared with $290 million, or 15 cents a share, a year earlier.

Dell, which has been struggling to gain profitability due to sales of lower-cost PCs and some higher component costs, said it expects "a normal, seasonal sequential demand pick-up in the low single digits in the second quarter."

"In addition, the company expects some components to remain in tight supply for the next couple quarters and some volatility in global currencies," Dell said in a statement.

The stock finished the regular Nasdaq session down sharply at $14.34, on a day when stocks, especially those on the Nasdaq, were broadly lower.

Dell is the world's third-largest PC maker behind Hewlett-Packard and Taiwan's Acer.

Slideshow: Biggest Tech Blunders in the Last 25 Years