Dell cuts full-year revenue forecast on PC chip shortage

Dell Technologies Inc cut its full-year revenue forecast on Tuesday as its PC business grapples with a shortage of chips from Intel Corp, sending its shares down nearly five percent in extended trading.

Dell is the third-biggest PC maker after China's Lenovo Group Ltd and HP Inc, with the business accounting for nearly half of its total revenue.

"Intel CPU shortages have worsened quarter over quarter, impacting our commercial PC and premium consumer PC Q4 forecasted shipments," Chief Operating Officer Jeffrey Clarke said on a post-earnings call with analysts.

Intel said last month that demand for its processors used in PCs was outstripping its ability to add capacity, prompting it to rely on contract manufacturers to ease shortage.

Dell's PC business had a strong quarter, with sales rising 4.6 percent to 11.41 billion U.S. dollars and mirroring upbeat results from rival HP, which also reported earnings on Tuesday.

Revenue from Dell's server and networking unit, however, dropped 16 percent to 4.24 billion U.S. dollars in the third quarter ended November 1, while sales in its VMware unit rose 11.4 percent.

VCG Photo

VCG Photo

The PC maker said excluding China, its server business was down mid- to high-single digits in the quarter and that demand for servers will "remain challenged."

The company cut its fiscal 2020 revenue forecast to between 91.5 billion U.S. dollars and 92.2 billion U.S. dollars from between 92.7 billion dollars and 94.2 billion U.S. dollars.

The Texas-based company reported total revenue of 22.84 billion U.S. dollars for the latest quarter, narrowly missing estimates of 23.04 billion U.S. dollars, according to IBES data from Refinitiv.

Dell's net income was 552 million U.S. dollars, compared with a loss of 895 million U.S. dollars a year earlier.

Excluding items, the company earned 1.75 U.S. dollar per share, while analysts were expecting a profit of 1.62 U.S. dollars per share.

Source(s): Reuters