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Dell (NYSE:DELL) shares down on shortage of chips, mixed Q3 report

 

  • Computer software company posts $1.75 Non-GAAP EPS and $22.93bn revenue.
  • Chip shortage from main supplier to hit sales in Q4.
  • Shares dip 5.3% in Wednesday’s trading.
  • HP Inc. posts Q3 beats in midweek but shares also fall.
  • The world’s second-largest PC maker continues to resist multi-billion-dollar takeover by Xerox.

 

Dell Technologies (NYSE:DELL) shares closed 5.3% lower on Wednesday after the personal computer manufacturer delivered a mixed Q3 report and said a shortage of chips would negatively impact sales in Q4.

For the three months to 1st November 2019, Dell delivered $1.75 Non-GAAP EPS for a 16 cent beat, but revenues, while rising 1.2% year-over-year, fell $100m short of the Wall Street consensus at $22.93bn.

Dell then followed up with a warning of issues with its chip supply from primary supplier Intel Corp (NASDAQ:INTC), a shortage that has become steadily worse in recent months and will now hit the company’s shipment forecasts.

Dell offered a $94.2bn revenue outlook for fiscal 2020 in the summer, but the latest logistical problems forced it to shave $2bn off the high-end guidance on Wednesday, which now stands at $91.5–$92.2bn.

In a conference call, CFO Thomas Sweet said the Intel supply dynamic was the main reason for the reduction in range but also revealed ongoing “macro headwinds” in China and a drop off in demand from clients on the back of the Windows 10 refresh.

Sweet expects those conditions to result in a “more cautious” outlook for growth in fiscal 2021.

He added: “We also expect the benefit of the fiscal year 2020 component cost deflation to wane as component cost of forecast is to be inflationary in fiscal 2021.”

Dell shares slipped into negative territory before markets opened in midweek, failed to rally thereafter and eventually finished the session 5.3% lower for a $50.39 per share value.

HP Inc (NASDAQ:HPQ) also tumbled despite the printer and PC specialist coming in with strong earnings and revenue for Q4.

HP posted $0.60 Non-GAAP EPS for the three months to 30th October, which was an impressive 11.1% advance on Q3 2018 and two cents up on pre-report expectations.

Growth in group revenues was more modest at 0.3%, but the $15.45bn tally sneaked in ahead of the $15.25bn forecast by analysts.

HP now sees non-GAAP earnings at a range of $0.53–$0.56 for the first quarter of FY 2020 and at $2.24–$2.32 for the full year versus the $2.23 expectations.

CEO Enrique Lores would not be drawn on a potential $33.5bn takeover by Xerox but used the conference call to set out HP’s strengths and the fact that he believes shares are still undervalued, despite rising 20% since news of the Xerox offer filtered through.

HP shares eased 0.2% higher after the first bell on Wednesday but went into reverse in the afternoon and eventually finished 1.4% lower at $19.79.