Dell shares slip in premarket trading after 1st-quarter gross margin disappoints
By APFriday, May 21, 2010
Ahead of the Bell: Dell margins disappoint
NEW YORK — Shares of Dell Inc. retreated in premarket trading Friday after the computer maker posted higher first-quarter results but disappointed investors with a lower gross margin than a year ago, hurt by the rising cost of PC components.
The company’s net income jumped 52 percent and revenue rose 21 percent in the February-April period, boosted by increased demand for new PCs from businesses replacing old ones. The results surpassed Wall Street’s expectations.
But its gross profit margin was 16.9 percent, down from 17.6 percent at the same time last year.
Kaufman Bros. analyst Shaw Wu said Dell had a “nice quarter” but the gross margin was disappointing, as the company “didn’t deal with rising component costs as well as” rivals Apple Inc. and Hewlett-Packard Co.
“(The) reality is that Dell has a much less diverse business model and thus much less room to maneuver,” wrote Wu, who rates Dell “Hold,” in a note to investors.
Shares of Round Rock, Texas-based Dell slid 51 cents, or 3.6 percent, to $13.81 in premarket trading Friday.
