Investment Contrarians

Dell Issues Shocking Corporate Earnings Report

By for Investment Contrarians |

Dell Issues Shocking Corporate Earnings ReportThe latest corporate earnings results from Dell Inc. (NASDAQ/DELL) were quite shocking, as the firm dramatically cut its full-year forecast. Technology stocks have always been under heavy competition, but it appears that Dell is losing its touch at driving corporate earnings growth rates.

Dell is fighting against a whole new level of technology stocks. Competition is coming not just from other PC makers, but now tablet makers as well. We’ve all seen the massive surge in “iPads” purchased from Apple Inc. (NASDAQ/AAPL) and this landscape of technology stocks encroaching into each other’s territory will continue.

While Dell is having a hard time maintaining corporate earnings, technology stocks like Apple are increasing them. The reason is that product innovation is driving consumer tastes and, ultimately, corporate earnings.

With a forecast of decreasing revenue and a much-lowered corporate earnings level, the company needs to adjust its business structure. The company did cite that a possible reason for the slowdown was a lull in buying, as people await the new Microsoft Corporation (NASDAQ/MSFT) “Windows 8” operating system.

Part of the solution, according to Dell, is to cut costs. I think the firm needs a bolder strategy to compete against other technology stocks. Generating corporate earnings in this heavily competitive marketplace is not easy, and I don’t see how Dell will all of a sudden regain its old form.

 

dell stock market  chart Chart courtesy of www.StockCharts.com.

 While some technology stocks like Apple are hitting new highs, Dell has languished near the bottom. Since the spring, any time the market has shown any life, sellers have dumped shares into the market. With the corporate earnings forecast now slashed, it will be difficult for the stock to move up unless management comes up with a realistic plan to compete against the other technology stocks.

Technology stocks in the PC market are essentially commodity products. The way these technology stocks can increase corporate earnings is to differentiate themselves from the crowd. Apple is an obvious choice as the leader in creating unique products, at least from a marketing point of view. With more technology stocks offering tablets, the PC market is becoming increasingly fragmented. Under such stress, I would caution investors not to jump in too soon. Unless there are evident signs of a turnaround in the decline of Dell’s corporate earnings, I would avoid the stock and look to other technology stocks. It’s always dangerous trying to pick a bottom, and with the heavy competition they’re under, it’s far too soon to step in and buy.

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  • Techy Toad

    Dell needs to build a better laptop…too many reloads out of the box, hard drive failures and just pure cheap consumer grade laptops. Have not seen any other OEM build such poor laptops with HDD's mounted to the bottom of the Mobo…that's just insanity for tech's like me and screwing the consumer!

  • Ovi

    Dear Dell,

    I hope you see this and "listen".

    You need to build high end, high quality Alienware gaming laptops to start.
    Same goes for ultrabooks. Leave the plastics at home. Same with mainstream laptops; make them higher quality so they rise above the competition. Even the ones that are aluminum on top have a fat, rounded, ugly plastic bottom.

    I recently purchased an Alienware M17x laptop and returned it because for ~2.5K that's not the kind of quality you should get. It's fat and covered in plastic. The case hasn't been redesigned in a long time either..

    I'm not surprised they're losing money because competition is fierce. Also if you notice your mobos or screens or speakers fail, Improve them or change suppliers. Focus on your XPS line as well and develop it. Don't take that many design cues from Apple; develop your own style. For example the Samsung 9-series black ultrabook looks amazing compared to MacBooks. It makes them look ugly, plain and boring, like wallpaper paste. :)

    Put emphasis on quality and performance. You might make more money off of your low-end laptops but you have to build up your reputation.

    Also VERY important, your current XPS line does not compete well with MacBooks. They are priced the same or higher and they do not offer the same sort of performance. I really wanted to buy one but since MacBooks are overpriced, yours are ridiculously priced. The design is very nice btw, just not original. Also why is the GT640 the best video card you can get? Do not be afraid to step on some Alienware toes. Please.. They are two types of computers. The gamers will get Alienware anyway for the gaming-oriented design and extra performance and cooling.

    last but not least. While Apple is advertising their features to the ends of the Earth, people do not seem to be aware of what windows can do. Some features like WI-DI and hybrid SSD drives and RAID 0 are not known to the general public at all. I learned this by selling computers at a big box store for two months by chance. I am a systems and computing engineer so I did my best to educate the store's customers. What I found is that when people knew the difference they would stray away from Apple to a PC product in the vast majority of cases. I got extremely good at changing people's minds from Apple to Android and PC. :)

    So.. I don't know if cutbacks are the solution. It might be for now; but Dell's focus should be on developing a high end product and then marketing it properly. IF you make something amazing and no one knows about it, it won't sell. Case and point, ASUS Transformer series. I have never ever seen it advertised by ASUS. I have an Infinity model with a dock and it is the best gadget I've ever bought alongside my Nexus 4.

    If you need help with hardware, design or software over there I'd be more than happy to oblige.Just reply here. That would be the most interesting way to get a job offer I have ever had. :)

    Thanks for reading through this long-winded post. Have a great day.

    Ovi, Canada

  • Ovi

    Another suggestion is to look into asking Microsoft for the VaporMag manufacturing technology and to look into integrating the Leap motion sensing system in one of your laptops. It is not market ready tech yet but it might be with Dell's backing.

    Both those have never been done in laptops and would truly be revolutionary. Just throwing a couple ideas your way. :) :P

    p.s. Like anyone at Dell will ever read this.. hehe. Thinking "out loud" is healthy sometimes though.