Is Dell Gaining Steam, Or Blowing Smoke?
Business Week noticed that Dell Computer exceeded analyst's forecasts for the last quarter, and wonders whether that signals a turnaround for the company or it's just an anomaly. And since Dell is under a great deal of scrutiny about its past accounting practices from the SEC and the US Attorney in New York, they might not be done figuring out if they're making money or they're not yet.
As upbeat as the results were, analysts couldn't help comparing them with those of competitor Hewlett-Packard, which on Aug. 16 reported strong fiscal third-quarter results, fueled by a 29% jump in PC sales. HP, the world's No. 1 PC maker, also jacked up projections for the rest of the year.
Contrast that with the performance of Dell's core PC unit: Revenue in that business gained just 3.4%, to $8.9 billion. "There is still a lot of work to do in its PC business, so Dell is still a work in progress," says Gartner analyst Charles Smulders.Much of that work is under way. Dell has begun selling a few models in Wal-Mart Stores and other retailers around the world, ending a long-standing practice of selling to consumers exclusively over the phone and online.
I'm surprised BusinessWeek didn't factor in Dell's small windfall from the falling prices for computer components during the period. Those prices are expected to rise in the near future, and Dell has very little room to raise prices with Hewlett Packard and now Acer to keep pricing pressure on Dell high. Don't light any cigars over there at Dell with hundred dollar bills, just yet, fellas.
