Dell, HP Report Big Drops, Warn of Continuing Lag

Leading computer makers Dell Computer Co. and Hewlett-Packard Co. reported sharply lower quarterly results Thursday and warned that they expect no dramatic improvement before next year.

The companies met or exceeded consensus analyst estimates for the period just ended, but they said that a PC price war was continuing and that their sales in the next three months will be lower than a year earlier.

HP Chief Financial Officer Bob Wayman told investors on a conference call that fiscal fourth-quarter sales could fall more than 14%. Dell said its revenue could be off 5% to 10%.

“We are generally looking toward the spring of 2002 as a period where we may see a more robust demand cycle from corporations,” Dell Chairman and Chief Executive Michael Dell said on a call.

Dell, which is the biggest seller of PCs, said it met expectations as profit in its fiscal second quarter fell 28% to $433 million, or 16 cents a share, before a $742-million charge for plant closings and job cuts. Revenue slipped 1% to $7.6 billion.

Dell posted a second-quarter net loss of $101 million overall--its first quarterly loss since 1994--contrasted with net income of $462 million in the year-earlier period.

“They are not seeing a back-to-school season materialize,” said Eric Rothdeutsch, analyst at Robertson Stephens Inc. “It’s not a positive sign that the economy is turning around. It’s [a] sign that things are getting worse.”

Dell shares eased 12 cents to $25.38 on Nasdaq in regular trading, then fell to $24.90 in after-hours trading after the earnings report.

At Hewlett-Packard, fiscal third-quarter profit from continuing operations tumbled 90% to $103 million, or 5 cents a share, before an $8-million gain for early debt retirement. Sales fell 14% to $10.1 billion. HP said its per-share profit, excluding some expenses, was 11 cents, beating recently lowered Wall Street estimates of 4 cents.

HP shares inched up 3 cents to $24.13 in regular New York Stock Exchange trading, and then rose to $24.60 in after-hours activity.

Dell said shipments of servers that power computer networks rose substantially and that it gained more PC market share in the U.S.

Cutting prices allowed the Austin, Texas-based Dell to ship 13% more machines in the quarter even though the industry as a whole shipped 11% fewer computers than a year ago. Dell’s revenue in the Americas slipped 3%.

“Our strategy to profitably gain market share in this slow-growth environment continues to work well,” Michael Dell said.

Hewlett-Packard, which hasn’t cut PC prices as much, saw a steeper drop-off in business.

Revenue in HP’s consumer business, which includes some printers and other devices, dropped 21% from a year earlier. Computer sales to homes and corporations fell 22%.

HP CEO Carly Fiorina said the PC business remains important to HP, in part because of the associated sales of printers.

But she offered little hope for a quick comeback, saying the normal fall upswing will be “more subdued than those in the past.”

“Our plan is to take the necessary actions to position HP for success when the recovery comes,” Fiorina said.

Also Thursday, shares of optical network equipment maker Ciena Corp. plunged $8.50, or 30%, to $19.62 in heavy trading on Nasdaq after warning it would miss earnings and revenue forecasts for its fourth quarter and fiscal 2002.

Ciena also reported third-quarter net income of $5.7 million, or 2 cents per share, compared with earnings of $28.2 million, or 9 cents per share in the year-ago period. The company blamed a slowdown in spending by telecommunications carriers that use long-haul networks.

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Times wire services were used in compiling this report.