Dell Drops on Weak Outlook

Dell Computer Corp. (Nasdaq: DELL) was down US$1.38 at $24.25 early Monday after the computer maker said operating results for the fourth quarter will be below earlier expectations because of "deterioration in global economic conditions and overall demand for computer systems and services."

Austin, Texas-based Dell added that unit shipments grew at four times the industry rate, and revenue growth will be "strong" for the quarter.

"This performance clearly distinguishes us from other computer-systems companies, given current realities of the global economy and computer-systems market," said chairman and chief executive officer Michael Dell.

Dell added: "Customer preference for direct relationships continues to grow, and we're extending our price leadership, regardless of the economic environment."

Revenue for the quarter is likely to total $8.5 billion to $8.6 billion, up 16 to 20 percent from a year earlier. The company had previously predicted revenue of $8.7 billion.

However, earnings per share were set to end up at 18 to 19 cents, up 25 to 27 percent from a year earlier, but below the 26 cents per share previously projected.

Shipments for the quarter are likely to be up more than 40 percent from a year earlier, Dell said, thanks to strong growth in servers, storage products and workstations, in addition to notebook computers.

Dell said it will continue to "aggressively manage its already lean cost structure" over the next year.

"We are bringing the full competitive force of our direct business model to bear on the marketplace to benefit customers, accelerate market-share gains and position Dell for profitable, long-term growth at a multiple of the industry rate," he said. "We intend to succeed on all counts."

In the third quarter, Dell beat analyst estimates, but saw its revenue growth rate slow to about 20 percent from its previously torrid pace of 40 to 50 percent amid a slowdown in demand for personal computers. Other computer makers have run into similar problems.