Has Dell Hit Rock Bottom Yet?
Like many other PC makers, Dell Inc. (DELL) has been suffering from commoditization in recent years. Of course, Apple Inc. (AAPL) has been able to maintain a premium for its desktop and laptop offerings, even while creating (and dominating) new categories with the iPad and iPhone. But of the traditional PC makers, only Lenovo has seen robust growth recently. For the most recent quarter of Q212, Dell saw an approximately 12% drop in unit shipments year-over-year (as did chief rival Hewlett-Packard Co.: HPQ), even though industry shipment volume was roughly flat over the prior year. While Hewlett-Packard certainly has its problems, at least it has a highly diversified business. This should (at least in theory) allow it to survive a slowdown in the PC business.
Dell, by contrast, still relies heavily on the PC business. In its most recent quarter, the Desktop PCs and Mobility segments combined to produce half of Dell's revenue (though a smaller proportion of the company's profit). The recent weakness in PCs has put pressure on Dell's bottom line. In the Q2 earnings press release, Dell dropped its non-GAAP annual profit guidance to at least $1.70 per share. That contrasts with the company's original forecast for non-GAAP EPS to exceed FY12's level of $2.13. In response to this dose of bad news, Dell shares have dropped by more than 15% since the earnings release, hitting a new 52-week low of $10.57 last Friday. READ FULL ARTICLE HERE