As my colleague Brian Caulfield noted yesterday, Dell beat expectations for the second quarter. But it also warned that Q3 revenue will be down 2%-5% sequentially, and it projected full year profit guidance of $1.70 a share, well below the previous Street consensus of about $1.90.
As you might imagine, the Street analysts who track Dell are none-too-pleased.
"Pain now for gain later has to be Dell’s mantra," UBS analyst Steven Milunovich writes in a research note. "The company is undergoing a classic repositioning, in this case from a direct PC seller to an enterprise infrastructure player. With enterprise likely under 45% of operating profit, we don’t expect to see much progress until FY 2015." He notes that the company's PC business appears to be collapsing. Q2 sales were down 14%, with consumer PCs down 22%. He keeps his Neutral rating on the stock.
Sterne Agee analyst Shaw Wu is similarly worried. "Its outlook was surprisingly weak despite already low expectations," he writes this morning. "With key competitors Apple, IBM, and Cisco posting better results, one can't help but wonder if Dell is simply losing share. Bottom line is that the transformation beyond PCs is tougher and taking much longer than the bulls expected."
Topeka Capital Markets analys Brian White offers a potential solution for hastening the company's transition to IT infrastructure: Get out of PCs. "Given the continued challenges in the PC business, we believe Dell should consider getting rid of this business and focus on expanding its enterprise solutions business," he writes.
Hard to imagine Dell simply getting out of PCs, but the fact that anyone would propose that idea only underlines the current malaise in the PC sector. Let's not forget that not all that long ago, Hewlett-Packard was mulling a spin-off of its own PC business - a widely ridiculed move that led to the ouster of former CEO Leo Apotheker. Maybe Leo actually knew what he was doing.
This afternoon, the conversation continues, as Hewlett-Packard reports earnings for the July quarter.
Dell this morning is down 68 cents, or 5.5%, to $11.66. Meanwhile HP shares are down 48 cents, or 2.4%, to $19.45.
