Dell delivers a downer
In short, the PC maker's quarter was an unmitigated disaster.
Man, was Dell (DELL) bad Tuesday night.
The company saw a collapse of personal computer sales, including a dramatic revision down from just the June quarter. Plus: A 14% decline in personal computers. BRIC country business down 15% -- that's right, down. Asia Pacific off 12%. India and China weak -- China for the first time ever. Sequential revenue coming down. And terrible Ultrabook sales.
In short, even in a world where we have rallied stocks on beating or meeting reduced expectations, this one is tough to swallow.
What's going on here? I think there are multiple problems. The first is Apple (AAPL). It's pretty clear from these numbers that lots of the decline is coming from Apple. Tuesday Tech Data (TECD) told us about how Apple's iPad is killing it, and it seems to be killing Dell, too. Michael Dell has said over and over that we are developing into a three-device mobile world: your PC (preferably an UltraBook or a Notebook), your mobile phone and perhaps your tablet. I would revise that statement after this quarter and say that we are entering a two-Apple-device world: your iPhone and your iPad.
It's not just Apple, though. I think EMC Corp. (EMC) is crushing Dell, too. Remember, Dell was partners with EMC not that long ago. Now EMC has partnered with Lenovo, and Lenovo said not that long ago that business is strong in many of the areas in which Dell says it is weak.
Plus, even as Dell has oodles in cash ($14.6 billion) and has been buying back shares (29 million, to be precise), I think it has to make more acquisitions just to keep up with the EMC business it lost. The company needs to buy a flash storage business such as the one for which EMC just paid a little less than $500 million, Israeli company XtremIO -- hence the speculation that Fusion-io (FIO) could be in Dell's crosshairs even as that is a huge $2.7 billion company.
I also didn't hear anything that could be encouraging for Hewlett-Packard (HPQ), which reports Wednesday night -- and remember, HP said it's going to have a $9 billion loss this quarter because of charges against its service business. I suspect revenue is going to be terrible, given what Dell had to say.
Two positives at Dell:
- Gross margins were better for the sixth straight quarter
- The enterprise business was solid.
But those are just more reasons to buy EMC.
In short, this was an unmitigated disaster. The one thing Dell, the stock, has going for it is that we were looking for a disaster, albeit a mitigated one.
We didn't get it.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long AAPL and EMC.
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From the content of these comments, it appears that hardly anybody cares about Dell or the PC market. After formerly working at Dell, I have no sympathy for them. They’ve been a slow train wreck for some time now.
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All hail the bull market, which ended the week with a big rally. But it also is starting to look a little like 1987, which suffered an epic blow-out.
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