Computer maker Dell's quarterly profit plunged 54 per cent on lower-than-expected sales as it lost market share to competitors engaged in a price war in the PC market.
Shares of Dell tumbled 6 per cent in the US following the results, which also show a decline in gross margin that disturbed Wall Street analysts.
The weak performance reflected the growing divide between Dell and its larger rival Hewlett-Packard, which had posted higher-than-expected preliminary earnings.
"It was universally expected they would beat because pretty much everyone else in the PC space has posted strong numbers," Kaufman Bros. analyst Shaw Wu said of Dell. "So the conclusion is that they lost share - lost a lot of share."
Despite the report, Dell executives spoke optimistically about demand trends and expectations for a wave of new spending next year as companies update aging equipment.
PC sales had weakened ahead of the October launch of Microsoft Corp's Windows 7 operating system, before surging afterward, said chief financial officer Brian Gladden, adding that the backlog at the October 30th close of the quarter was larger than normal.
Dell reported a net profit of $337 million, or 17 cents a share, for its fiscal third quarter, down from $727 million, or 37 cents a share, in the year-ago period.
Revenue fell 15 per cent to $12.9 billion, missing the average analyst estimate of $13.2 billion.
While the revenue shortfall was troubling, some analysts also expressed concern about Dell's margins, particularly because the company had stressed profitability over growth amid a $4 billion cost-cutting effort.
Dell said it saw pressure on component costs, a trend that has continued into the current quarter. Its gross margin was 17.3 per cent in the third quarter, down from 18.7 per cent in the second quarter and 18.8 per cent in the year-ago period.
Reuters