Dell shares tumble after warning over sales

Shares of Dell suffered their biggest single-day fall since the collapse of the dotcom bubble on Friday after the world’s biggest PC maker said sales and earnings would fall short of expectations in the second quarter. The news capped a grim week for technology stocks.

Kevin Rollins, Dell’s chief executive, said “aggressive pricing” had led to a decline in profitability at the company, which has been struggling to right itself for more than a year amid increased competition from low-cost rivals and a drop in sales growth.

Andrew Neff, analyst at Bear Stearns, said he saw “potential for change” among senior management as the company struggles to get back on track: “Either [Mr Rollins] has to fix it or they have to get a new guy in charge.”

Price competition and slowing demand for PCs led other tech bellwethers to suffer this week. Intel shares fell 7.5 per cent on Thursday after it reported second-quarter sales down 13 per cent and warned it would probably miss 2006 revenue targets set in April. Sales are likely to be around 10 per cent down on 2005 at $35bn after three years of double-digit revenue and earnings growth.

AMD shares were trading more than 10 per cent lower on Friday after it reported mediocre second-quarter results – hit by slowing demand and stiff competition from its larger rival Intel.

Meanwhile, Yahoo shares fell nearly 22 per cent on Wednesday on uninspiring second-quarter results and the news that new ad technology, to help it match Google, was being delayed by a quarter and would produce no revenues this year.

Google, the internet search company, and Apple Computer were two bright spots. Google’s second-quarter profits more than doubled owing to market share gains and increased ad revenues. Strong sales of Macintosh computers and speculation that Apple may be close to unveiling fresh upgrades to its iPod music player line led shares in that company more than 11 per cent higher on Thursday.

Dell’s shares hit a five-year low on Friday, falling almost 14 per cent to $19.02. The shares have fallen more than 50 per cent over the past 12 months.

In an interview last month with the FT, Mr Rollins said Dell and its management were acting with a “sense of urgency” to put the company back on track and restore its reputation for out-performance.

Dell has announced plans to accelerate $3bn in cost cuts and plans to invest $100m this year to improve customer service this year.

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