Dell Cuts Forecast, Shares Down Five Percent

Dell Inc. (DELL), the world's biggest personal computer maker, warned that third-quarter earnings and revenues would be below Wall Street expectations, and cited weaker-than-expected U.S. consumer and U.K. businesses.

Dell (search), whose shares fell 5.1 percent in after-hours trading, also said it would take a charge of about $450 million in the third quarter, largely related to repairing some computer systems.

Dell in August missed analysts' second-quarter revenue growth forecasts because it lowered prices aggressively on its entry-level U.S. personal computers.

Dell, based in Round Rock, Texas, said it expects a fiscal third-quarter profit per share of 39 cents before one-time items, missing analysts' average estimate of 40 cents per share, according to Reuters Estimates.

Dell said it expects to report revenue of $13.9 billion, below the company's earlier forecast of $14.1 billion to $14.5 billion and analysts' $14.3 billion estimate.

"They were seeing some weakness in desktop and strength in notebooks, but not enough to offset the weakness in desktop," said analyst Shaw Wu of American Technology Research (search). "Dell's problem is that it's not differentiated enough" from competitors.

Dell said the third quarter charge would equal roughly 14 cents per share and would result in net earnings per share of 25 cents.

Dell said the largest part of the charge was associated with the cost of servicing systems that included a vendor part that failed to perform to Dell's specifications. Dell did not name the vendor in its statement.

The problem affects "a small percentage" of older OptiPlex (search) desktop systems, the Round Rock, Texas company said. The charge also includes costs for "workforce realignment, product rationalizations and excess facilities," the company said.