Dell Earnings Drop 46%

123jump.com Staff
17 Aug, 2006
New York City

Dell reported 46% fall in earings in the second quarter as it battled sever price discounting in the U.S. and market share struggle in the Asia Pacific region. The comapany also reported operating earnings margin of 4.3% of revenue in the quarter. The company managed to eke out mere 1% rise in sales in the U.S. and hold on to its market share leadereship with 34.2%. The company managed to gain sales in the Western Europe in a declining market.

AFTER THE CLOSE EARNIGS

Dell ((DELL)) reported second quarter fiscal 2007 earnings of 22 cents compared to 41 cents a year ago on revenue of $14.1 billion. The earnings declined 46% on revenue gain of 5%. The company reported operating income of $605 million or 4.3% of revenue. The company recorded 1% revenue in the U.S. with a market share of 34.2%, in Western Europe the company revenue rose 3% and unit growth of 6% and in Asia Pacific and Japan the unit sales rose 27%. The company also stated that the SEC has requested information relating to revenue recognition and other accounting and financial reporting matters for certain past fiscal years, and the company is cooperating with the investigation. In the aftermarket trading the stock fell 5%.


[R]4:00PM Fall in oil sustains the third day of rally on Wall Street.[/R]

-Yield on 10-year bond closed at 4.877% and 30-year bond closed at 5.007%.
-Crude oil dropped $1.83 to close at $70.06 per barrel.
-Gold closed $13.60 lower at $619.30 per ounce.

-Asian Markets closed mixed with Japan down 0.31% and Australia up 1.8%. South Korea and Indonesia gained 0.95% and Singapore rose 0.7%.

-European Markets struggled to close higher led by 0.35% rise in Germany, Spain and Switzerland. South Africa gained 1.5% and Russia lost 0.4%.

-Latin American Markets closed lower led by 0.6% loss in Brazil and Argentina. Mexico eked out a small gain of 0.15%. Brazil released a record current account surplus.

For the third day averages managed to close higher. A drop of 2.5% in oil price and strong earnings from Hewlett Packard ((HPQ)) kept buyers in control for most of the day. The mild gain in averages was not reflected in broader trading as several stocks declined, notable energy related stocks. Retailers, investment bankers, retail banks and Internet stocks advanced but energy, mining and construction related stocks lost the ground.

Merck ((MRK)) lost 5% on court case losses in two separate trials. A jury in New Orleans found the company negligent in Vioxx heart attack and ordered the company to pay $50 million to plaintiff. In a separate case in New Jersey, a judge threw out Merck victory in an earlier Vioxx Case. There are more than 14,000 lawsuits pending related to Vioxx.

Hewlett Packard reported third quarter earnings of 48 cents or $1.38 billion compared to 3 cents or $73 million a year ago. In the previous year the company had repatriated profit form international operations to take advantage offered by the U.S. Congress. The company also reported revenue gain of 5.4%. The company board also authorized $6 billion for stock repurchase plan.


[R]12:30PM European markets finished in the positive.[/R]
European markets ended in the positive territory after a lackluster trading session with no major data reports and little corporate news. Still, sharply lower oil prices provided support for the market. Crude oil slipped $1.09 to trade at $70.80 a barrel on easing supply concerns and cooling Mid-east tensions. Subsequently, a number of companies benefited from the lower prices, but companies in the energy sector posted losses, including French Total, down 0.8%. Among advancing stocks, Ciba Specialty Chemicals jumped 9.8%, truck maker Volvo rose 5% and automaker Renault gained 2.8%, while Van der Moolen added 2.1%. The German DAX 30 gained 0.4%, the French CAC 40 edged up 0.2%, and London FTSE 1200 inched up 0.1%.

Oil price hit an eight-month low on easing supply concerns and receding tensions in the Middle East. Light crude September delivery fell $1.69 to $70.20 a barrel. London Brent dropped $1.44 to $71.39. The dollar traded mixed versus major currencies. The euro traded at $1.2866, up from $1.2836. The dollar bought 115.48 yen, down from 115.87. The British pound stood at $1.8926, down from $1.8948. European gold prices dropped. In London the precious metal traded at $624.80, down from $628 per ounce. In Zurich gold traded at $623.48, down from $629.60. Silver closed at $12.13, down from $12.31.


[R]11:30AM Stocks rebound from earlier weakness.[/R]
Stronger-than-expected earnings from Hewlett-Packard and a sharp decline by the oil price helped stocks rebound from earlier weakness on profit taking. Crude futures hit an eight-week low to $70.55 on easing supply concerns. Dow industrial Hewlett-Packard ((HPQ)) jumped 5% after reporting a surge in Q2 profits, powered by strong laptop and printer sales. Another gainer was Advanced Micro Devices ((AMD)) which rose 7.8% to $24.33 after Citigroup upgraded the stock to buy, citing n improving near-term PC market and the company''s partnership with Dell. On the side of the losers, Sears ((SHLD)) reported 83% profit jump, but investors remained concerned about falling sales and the retailer’s shares fell 3.4%. Merck & Co ((MRK)) shares fell 1.6% to $40.51 after a federal jury found the drug maker negligent in the the heart attack of a 62-year-old former FBI agent, in the second federal Vioxx trial. Over 14,000 lawsuits have been filed related to Vioxx. Another Dow Component General Motors ((GM)) fell 1.6% at $30.51 after J.P. Morgan downgraded the auto maker. By sector, airlines, semiconductors, and internet stocks moved to the upside, while oil services, energy and banking stocks posted weakness. In late morning trading, the Dow Jones industrial average rose 16.49, or 0.15%. The Standard & Poor''s 500 index added 0.89, or 0.07 percent, to 1,296.32, and the Nasdaq composite index gained 7.89, or 0.37 percent, to 2,157.43. Bonds gained ground for the third straight session, with the yield on the benchmark 10-year Treasury note falling to 4.86%% from 4.87% late Wednesday.


[R]10:30AM Sensex keeps gaining for the seventh day in a row.[/R]
The Sensex on BSE advanced 29.17 points, or 0.25%, to close on 11,477.48. The benchmark index moved in a range of 173 points. The market breadth was weak with small-cap and mid-cap stocks declining on profit-booking. Only 871 shares advanced, while 1,603 declined and 65 stocks remained unchanged. The daily turnover on BSE came to Rs 3,835 crore, higher than Wednesday’s Rs 3,455 crore. Of the thirty stocks in the index, 15 stocks advanced and 15 stocks declined.

Reliance Communication led the gainers, rising 4.55% to Rs 297.85 on a heavy volume of 4.3 million shares. It traded in a range of Rs 281 and Rs. 289. The other leading gainers included, Dr Reddy’s, gaining 2.70% to Rs 1,490, HLL, gaining 2.20% to Rs 235.50 and Tata Motors, surging 3% to Rs 841. Reliance Industries advanced 1.63% to Rs 1,062 on 2.3 million shares, in the afternoon trading in a range of Rs 1,038 and Rs 1,078.

Reliance Energy, Tata Steel, ONGC, and Hindalco led the main decliners. Reliance Energy sank 3.55% to Rs 462, Hindalco lost 2.72% to Rs 164.40, ONGC plunged 2.20% to Rs 1212 and Tata Steel was off 2.95% to Rs 517.50.

Metal stocks traded lower as they faced wave of selling. The decliners in the sector were led by, Tata Steel and SAIL which declined 2.06% to Rs 76.15, Essar Steel traded down 3.20% to Rs 34.90, Tata Sponge lost 2.86% to Rs 108.80 and Hindustan Copper dropped 2.6% to Rs 96.35.

Sugar stocks witnessed sustained profit-taking as product prices fell. Shares of KM Sugar were down 6.05% to Rs 49, Sakthi Sugars lost 5.80% to Rs 140, Oudh Sugar plunged 5% to Rs 119.65, Dwarikesh Sugar slipped 4.40% to Rs 122.50, Bannari Amman Sugars moved back 3.85% to Rs 975, Uttam Sugar slid 6.05% to Rs 179.50 and Bajaj Hindustan declined 3.25% to Rs 335.20.

Other non-constituent stocks that advanced were Shree Precoated Steels soaring 9.30%, to Rs 175.85 on a high volume of 6.81 lakh shares after it said that it plans to raise Rs 1,163 crore by issuing securities. Jagran Prakashan advanced 2.65%, to Rs 307 in the wake of the news that Ireland''s Independent News & Media had approached the Securities and Exchange Board of India, SEBI, to increase its stake in the Indian firm by up to 3%. Mahindra & Mahindra advanced 1.50% to Rs 644 on 2.43 lakh shares. The company intends to introduce another new vehicle after Ingenio''s launch in 2008.

Infrastructure Development Finance Company was the most traded stock on BSE with a turnover of Rs 256.14 crore. It gained 2.72% to Rs 58.60 supported by three block deals of 1.4 crore shares each, of which two were transacted at Rs 60 per share, while the rest was struck at Rs 57.90 per share


[R]9:45AM Stocks moved lower at opening on profit taking.[/R]
Stocks declined at opening Thursday, as traders turned to do some profit taking after three straight sessions of gains. Yet, falling oil prices and better-than-expected earnings report from Hewlett-Packard and Sears Holding generated some positive sentiment. Light, sweet crude fell $1.13 to $70.76 due to strong stockpiles and a cooling conflict in the Middle East. Hewlett-Packard''s ((HPQ)) earnings impressed with their strength, unexpected from a technology sector under pressure. Sears ((SHLD)) which posted 83% profit jump, provided some relief for investors concerned about the retail sector. In the first hour of trading, the Dow Jones industrial average fell 6.73, or 0.06%. The Standard & Poor''s 500 index lost 1.64, or 0.13%, and the Nasdaq composite index dropped 5.49, or 0.26%.

[R]Initial jobless claim fell more-than-expected.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended August 12. The report showed that jobless claims fell more than economists had been expecting. The report showed that jobless claims fell to 312,000 from the previous week''s revised figure of 322,000. Economists had expected jobless claims to fall to 315,000 from the 319,000 originally reported for the previous week. At the same time, the less volatile four-week moving average rose to 311,250 from the previous week''s revised average of 309,500. The report also showed that continuing claims in the week ended August 5 rose to 2.507 million from the preceding week''s revised level of 2.473 million.


[R]8:00AM Stock futures pointed to a flat opening.[/R]
U.S. stock futures pointed to a flat market opening following three consecutive sessions of gains. Tech stocks are expected to rise after Hewlett-Packard ((HPQ)) reported Q2 profit jump to $1.38 billion, or 48 cents a share, compared with $73 million, or 3 cents a share a year ago due to strong sales in its printing and personal-computer businesses. Revenue rose 5.2% to $21.89 billion. Revenue from HP''s printer division grew 5% to $6.2 billion, while sales of laptops increased 14%.Software sales were particularly strong, with 30% year-over-year growth. The company will likely complete the $4.5 billion acquisition of management software company Mercury Interactive Corp. in the current quarter. Hewlett-Packard Co. CEO Mark Hurd said that an aggressive cost-cutting campaign would start in the current quarter, with several thousand employees losing their jobs. In addition, the company authorized a buyback of up to $6 billion worth of company stock. Dell Computer Inc. ((DELL)) is scheduled to report quarterly results in the late afternoon.

Among retailers, releasing quarterly results, Sears Holding Corp. ((SHLD)) posted Q2 net income jump to $1.88 per share from 98 cents per share a year ago due to improved margins. Apparel retailers will also be in the spotlight, after Children''s Place Retail Stores Inc. ((PLCE)) posted a wider Q2 loss and New York & Co. ((NWY)) reported lower profit. Gap Inc. ((GPS)) and department store chain Nordstrom ((JWN)) are set to report after the closing bell. S&P 500 futures were down 0.7 points, slightly below fair value. Dow Jones industrial average futures rose 5 points, and Nasdaq 100 futures lost 1.25 points.


[R]7:30AM Exporters advanced in Asia, while oil-related stocks plunged[/R]
Asian markets were mixed on Thursday. Nikkei 225 Average in Japan shed 0.31% to 16,020.84. Nissan Motor gained 2.36%, leading auto stocks for the second running. Sony Corp. Gained 0.39% to break a two-day losing streak. Daiwa Securities Group surged 4.48% as recent gains by the Nikkei boosted hopes that trade would pick up.

Hong Kong''s Hang Seng Index closed down 0.45% at 17,373.05. Lenovo Group rose 5.6% as fellow PC maker Hewlett Packard posted a strong quarterly profit. South Korea''s Kospi index advanced nearly 1% on large gains by chip-maker Hynix Semiconductor and Samsung Electronics. Australia''s S&P/ASX 200 advanced nearly 2% as Qantas Airways and BHP Billiton both advanced. while China''s Shanghai Composite shed 0.8%.

[R]6:30AM European markets advance despite declining oil shares.[/R]
European markets were higher by mid-morning on Thursday. London’s FTSE 100 added 0.2 per cent to 5,909.2, while Xetra Dax in Frankfurt was 0.2% higher at 5,823.21 and in Paris, the CAC 40 was 0.2% higher at 5,136.57. Swiss insurance firm Zurich Financial Services Group, Ciba Specialty Chemicals and NYSE specialist Van der Moolen were the chief movers on the market.

Zurich Financial Services shed 2.2% in the wake of its statement that its first-half net profit rose but premiums declined. Ciba Specialty Chemicals jumped 5.6% after it reported an increase in adjusted profit and said that it would cut jobs. Van der Moolen advanced 4.3% after its second-quarter revenue increased 49% to 40.5 million euros.

Oil prices continued to drop Thursday as international traders responded to U.S. government data showing that crude oil stockpiles are above average. Light sweet crude for September delivery fell 47 cents to $71.42 a barrel in electronic trading, while the Brent crude for October delivery was down 39 cents at $72.44 a barrel on London''s ICE Futures exchange. The euro was higher against the dollar Thursday, extending its gain after U.S. inflation data eroded the likelihood of higher U.S. interest rates.
The euro rose against the U.S. Dollar. The European currency bought $1.2844 from $1.2836 late Wednesday in New York. It had risen above $1.2850 on Wednesday for the first time in a week. The British pound advanced to US$1.8964 from US$1.8948 in New York, and the dollar slipped to 115.59 Japanese yen from 115.87.