Dell hit hard by hard drive shortage in Q4

Blue screen.

The hard drive shortage hit Dell’s Q4 results as the company was unable to sell as many high-end computers as it had hoped, causing an 18% decline in earnings. CFO Brian Gladden said Dell was not able to obtain enough high-capacity hard drives and ended up offering more low-end, low-profit machines. According to Gladden, “We got more of the low-capacity drives than we wanted and that affected our ability to offer higher end products,” a problem he expects to extend until the third quarter.

As a result, earnings fell to $0.51 per share on revenue of $16.03 billion while analysts were looking for $0.52 on $15.96 billion. Looking ahead, revenue is expected to decline roughly 7% sequentially to $14.9 billion in Q1, short of the average analyst estimate of $15.2 billion. For the full year, management’s outlook was more optimistic, expecting earnings to exceed the $2.13 per share posted in 2012, ahead of the consensus estimate of $2.05.

On the back of the results, at least four major Wall Street brokerages either cut their target price for Dell, or downgraded the stock, with margin pressures and a declining PC market being common themes.

Dell (DELL : NASDAQ : US$17.15), Net Change: -1.06, % Change: -5.82%, Volume: 51,234,480

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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