Dell Computer, the second-largest personal computer maker, reported fourth-quarter earnings that were in line with Wall Street forecasts, but its revenues didn't meet expectations.
Even though some analysts cautioned late last week that the Round Rock, Texas, company would have soft revenues this quarter, the stock was hammered in after-hour trading on concern that Dell's rivals are permanently chipping away at its cost advantage.
Following the report, Dell's stock (DELL) tumbled more than US$13.25 to $75.50 in after-hours trading from its regular session close of $88.75, continuing a slide begun two weeks ago when the widely held technology stock stood at $110.
Net income for the period ended 29 January rose 49.2 percent to $425 million, or 31 cents per diluted share, compared to profits of $285 million, or 20 cents per diluted share, in the fourth quarter ended 1 February 1998.
Revenue rose 38 percent to $5.2 billion from $3.7 billion last year. The growth rate slowed substantially; in recent quarters, Dell has reported 50 percent growth rates.
The earnings report matched the consensus of securities analysts, according to First Call, which compiles brokerage estimates. But revenues fell short of many Wall Street projections for the quarter.
Dell makes computers built to customers' specifications, and ships them through the mail. Unlike Compaq Computer and Hewlett-Packard, two of its main rivals, Dell doesn't sell PCs through retailers, so it doesn't have to deal with middlemen and distributors. But in the past year, Dell rivals have adopted the company's strategy and are selling more PCs through direct-order channels. The switch is putting pressure on Dell to reduce prices.
Separately, Dell said its board declared a two-for-one stock split, the seventh in the company's last seven years. The split will be paid in the form of a 100 percent stock dividend issued on 5 March, to shareholders of record on 26 February.
Copyright© 1999 Reuters Limited.
