Dell Shares Drop After Sales, Earnings Decline

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Dell shares fell 13 percent Wednesday morning, a day after the company reported first-quarter earnings that missed analysts' expectations.

The company earned $635 million, or 36 cents per diluted share, on $14.4 billion on sales. Excluding onetime charges, Dell would have earned 43 cents per share. Analysts had projected earnings of 46 cents per share.

Sales and net income also came in lower vs. year-ago results, when Dell reported earnings of $945 million, or 49 cents per share, on $15.0 billion in sales.

Shares were trading at $13.06, down $2.02, or 13.4 percent, Wednesday morning.

"It was mixed in terms of our results. Revenue was clearly below what was expected, and there are areas where we'd like to see better execution on our side," said Brian Gladden, senior vice president and CFO, in a video on Dell's Web site. "There were also some areas of real strength that are aligned with our strategy. Our storage business grew; networking grew. Those are areas where we continue to make investments."

Revenue in the Americas fell 7 percent, EMEA revenue fell 1 percent while Asia-Pacific sales were flat, according to Dell.

Pricing pressure also hurt margins in the quarter, Gladden said, but he did not identify which areas faced the most pressure. "It's something we have to watch going forward. Clearly there are some areas where we need to reignite some growth in the business and drive some revenue improvement," Gladden said.

The SMB sector was one of Dell's lone bright spots. Sales of SMB products and services increased 4 percent to $3.5 billion. Public sector sales were down 4 percent to $3.5 billion and large enterprise sales fell 3 percent to $4.4 billion. But commercial sales weren't Dell's biggest problem in the first quarter -- consumer sales fell 12 percent to $3 billion.

Meanwhile, Dell-branded storage was up 24 percent, driven by Compellent and EqualLogic products, and now accounts for more than 95 percent of total storage revenue, according to the company. The company's longtime reseller relationship with EMC is nearly extinguished now, according to Dell. Non-Dell storage revenue fell to $21 million in the quarter from $119 million in the year-ago quarter.

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