Man, was Dell (DELL) bad last night:
- a collapse of personal computer sales, including a dramatic revision down from just the June quarter;
- 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
- Ultrabook sales terrible.
In short, even in a world where we have rallied stocks on beating or meeting reduced expectations, this one's a tough one 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. Yesterday Tech Data (TECD) told us about how Apple's iPad is killing it out there, and it seems to be killing Dell. 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 Corporation (EMC) is crushing Dell, too. Remember, Dell was partners with EMC not that long ago. Now EMC is partnered with Lenovo, and Lenovo came out not that long ago and said 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 goes tonight -- and remember, HP said that it was going to have a $9 billion loss this quarter because of charges against its service business. I suspect that the 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 a disaster, an unmitigated one. The one thing that Dell, the stock has going for it, is that everyone was looking for a disaster, albeit a mitigated one.
They didn't get it.
