Dell, Hewlett-Packard post large earnings declines

Weekly Corporate Growth Report, Aug 27, 2001 by Rock, Justin

Both Dell Computer and Hewlett-- Packard are feeling the crippling effects of the current economic slowdown, and there is no relief in sight.

Dell was able to increase its unit shipments by 19 percent while reporting a loss of $101 million for the second quarter of this year. This is compared to its $603 million profit for the same quarter last year. This loss is the first in eight years.

The firm reported sales of $7.61 billion, which is down 1 percent from $7.67 billion in 2000.

Dell earned $433 million for the quarter, but took the significant charge for costs associated with the layoff of 3,000 employees and investment costs and Equity investments such as its $340 million acquisition of ConvergeNet Technologies Inc.

Dell has also forecasted its third quarter earnings to be 10 percent less than its $8.26 billion of the year-earlier quarter. The company does not see the demand for computer hardware to turn around in the third quarter of this year.

The firm has had to rely on cost cutting to avoid even larger profit declines. This is causing investors to be slightly wary due to suppliers and rivals such as Intel and Compaq reporting demand for computer chips on the rise.

Hewlett-Packard Co. is also forecasting sluggish demand for computer and printer-related products for the third quarter. The normally robust back-to-- school season is not expected to have the impact of previous years.

However, the company's fourth quarter sales are expected to rise slightly from the third quarter, and the firm plans to continue its focus on cost cutting.

Hewlett's net income slipped to $111 million, compared with earnings of $1.05 billion fromthe previous year. Sales also fell 14 percent to $10.15 billion from $11.82 billion a year earlier.

The firm has also announced plans to eliminate up to 6,000 jobs by the end of October this year.

The reported sales matched its lowered forecast for last quarter, but the earnings, excluding nonrecurring and noncash items, were more than double what many analysts expected.

The company expects fourth quarter sales to increase slightly from the third quarter, and gross margin and expenses to remain about the same.

Source:Wall Street Journal, Hoovers.com

By Justin Rock

Editor