Dell Technologies (DELL) – Get Free Report shares moved lower Tuesday after the PC and laptop maker posted stronger-than-expected third quarter earnings but noted that weakening demand and strong US dollar would linger as headwinds into the final three months of the year and beyond.
Dell earned an adjusted $2.30 per share over the three months ending in October, smashing Street forecasts by around 60 cents per share, even as sales fell 6% to $247billion, a tally that also came in ahead of analysts’ forecasts.
Softer PC demand and a surging US dollar, however, will keep fourth quarter sales in the region of $23 billion to $24 billion, Dell said, with earnings forecast between $1.50 to $1.80 per share, around 15 cents shy of analysts’ forecasts at the mid – point.
“We expect ongoing global macroeconomic factors including slowing economic growth, inflation, rising interest rates and currency pressure to weigh on our customers, and as a result, their IT spending intentions even as they continue to digitize their businesses, CFO Tom Sweet told investors on a conference call late Monday.
“These dynamics are creating a broader range of financial outcomes for our upcoming fiscal year, particularly as we think about the second half of the year,” he added. “With what we know today, it’s likely next years’ revenue is below historical sequentials using our Q4 guidance as a starting point.”
Dell shares were marked 2.1% lower in pre-market trading to indicate an opening bell price of $40.21 each.
Earlier this month, Dell reached a $1 billion agreement with a group of litigants who challenged the company’s $24 billion deal with VMware VMW in 2018.
Dell, which had a stake in the cloud computing group at the time, paid $14 billion for a ‘tracking stock’, pegged to VMware’s performance, as well as around 150 million of its Class C shares, to VMware investors.
An investor group, however, claimed the so-called tracking stock undervalued VMware, while the Class C shares overvalued Dell. The settlement avoids a trial slated in the Delaware Chancery later this month.
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