Why Dell Shares Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of embattled PC giant Dell (Nasdaq: DELL  ) plummeted 17% on Wednesday after its quarterly results and guidance came in well below Wall Street expectations.

So what: Dell's first-quarter earnings and revenue fell a disappointing 33% and 4%, respectively, reigniting skepticism over management's much-ballyhooed turnaround efforts. Weak tech spending from corporations and increasing pressure from mobile threats like Apple on the consumer side continue to weigh heavily on results -- not to mention investor patience.

Now what: Management now expects second-quarter revenue growth of just 2% to 4% -- implying a total of $14.71 billion to $15 billion versus Wall Street's view of $15.44 billion. "This is a long-term strategy and will take time," CFO Brian Gladden reminded analysts in a conference call. "We're making progress and have several areas where our results are strong, proof points that our strategy's working." However, when you couple the quickly rising popularity of mobile devices with the macroeconomic headwinds working against Dell, I'd be cautious about buying into that turnaround talk.

Interested in more info on Dell? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Dell and Apple, as well as creating a bull call spread position in Apple. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On May 23, 2012, at 12:38 PM, peekel wrote:

    This really appears to be all about Microsoft and the enormous market gap they have created between Apple, Google, and everyone else. It's not about HP or Dell or any PC 'manufacturer' (distributor), who are simply MSFT's tools and now left with nothing compelling to sell.

  • Report this Comment On May 23, 2012, at 10:00 PM, TheCommonTulip wrote:

    Wow, I was way off in thinking that this stock represented a value pick a year or so ago. Warren Buffet once said "we have no interest in finding the value of a declining business"...it's looking like you could apply that quote to Dell more everyday. What a mess.

    AT

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