Dell foresees gloom and then doom

 

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Posted on 23 Jan 2001 at 15:29

Dell has moved to lower earnings expectations by issuing a profits warning for its fourth quarter. And the outlook is so tight that its CEO has forecast that at least two of the current top ten PC makers will be out of business by the end of the year.

Michael Dell is reported to have made the dire prediction regarding PC builders at a conference call organised to announce the company's revised financial expectations.

Dell officially announced that earnings for the three months ending 2 February would be between 18 cents and 19 cents per share (not the 26 cents the company originally predicted) and fourth quarter revenue will total around $8.5bn to $8.6bn, missing the $8.7bn mark originally expected.

The LA Times reports that Dell, which is the number one PC maker in America and is just behind Compaq worldwide, has traditionally depended on large-scale corporations for its sales. The sort of companies already feeling the slowdown in the American economy.

Jim Schneider, Dell's chief financial officer, told of the companies aggressive price cuts across its range of PC lines, which helped push up quarterly shipments. But, he also announced: "While we were taking those actions, the magnitude of the economic slowdown and the resulting slowing in infrastructure computing demand, has been greater than anyone expected."

"Driving gains in this environment requires more aggressive pricing which had a negative effect on earnings per share," he added.

It's the prospect of a continuing squeeze in hostile market conditions that lead Michael Dell to warn: "I think that there will certainly be some consolidation and competitive shakeout."

The announcements will ensure that Compaq will be firmly in the spotlight when it announces its fourth-quarter results after the close of trading in America today.

Author: Alun Williams