NEW YORK – Dell Computer Corp. will likely cut profit expectations during a business update planned for Thursday, analysts said, with the top computer maker facing weakening demand and fallout from the Sept. 11 attacks.
Such a move would follow Monday's warning by Compaq Computer Corp., the No. 2 PC maker, that it lost about a week's worth of business as a result of the attacks and would report an operating loss in the third quarter.
Dell, which did not immediately return a call seeking comment on Wednesday, overtook Compaq this year as the largest personal computer maker, but has not been immune to a market downturn despite a direct-sales business model widely seen as the computer industry's most efficient.
Investors have battered technology stocks in recent weeks amid concerns that repercussions from the attacks -- including shipping problems and a newborn hesitancy among some companies to upgrade computers -- have shattered a fragile recovery in the already ravaged industry.
Michael Dell, the founder and chief executive of the personal computer maker, helped prop up his company's stock by buying more than 4 million shares in the open market late last month, according to a filing with the U.S. Securities and Exchange Commission.
But the stock buyback has not stopped Wall Street analysts from paring back revenue and profit expectations for the third quarter in advance of Dell's business update.
U.S. Bancorp Piper Jaffray cut estimates on Dell's second- half revenues to $14.4 billion and earnings to 29 cents per share, from an earlier estimate of $15.2 billion and 33 cents per share.
For the third quarter, analysts on average expect Dell to report revenues of $7.27 billion and earnings of 15 cents per share, according to Thomson Financial/First Call.
``Corporate (technology) spending freezes and weaker consumer spending will cause most of our companies to fall well short of'' second-half consensus estimates, U.S. Bancorp Piper Jaffray analyst Ashok Kumar wrote in a research note.
Personal computer sales are expected to fall for the first time this year after many years of abundant growth, as a shaky economy, plunging prices, and weaker demand for electronics combined to foil what were once ambitious and nearly limitless hopes for continued growth.
But Dell should be able to pick up business from its competitors during the tougher times, said Lehman Bros. analyst Daniel Niles.
He said Dell would be able to take advantage of any confusion stemming from the merger of industry giants Compaq and Hewlett-Packard Co.
``We believe Dell's market share gains have actually accelerated during the past month due to ... customer confusion over the'' proposed purchase of Compaq by Hewlett-Packard, Niles wrote in a research note.
Still, he said he expects Dell to lower earnings estimates for this year and next year by 5 cents a share or less.