Dell, Inc. (DELL) posted better-than-expected revenue for the second quarter of fiscal 2009 as aggressive pricing that helped drive unit sales. On a positive note, it does appear that price cuts were successful in taking some share, and operating expense reductions are ahead of expectations.
On August 28, Dell released results for the second quarter of fiscal year 2009, ended August 1, 2008. Revenue for the quarter was $16,434 million in the quarter, ahead of our $15,958 million estimate and 11.2% above the $14,776 million reported in the second quarter of fiscal 2008.
However, we are concerned that Dell is returning to a period of strong share gains over profits. We therefore maintain a Hold rating on DELL shares and cut our six-month price target to $20.50.
At the beginning of fiscal year 2008, Dell announced five growth priorities, which include; Consumer, Emerging Countries, Enterprise, Small and Medium Businesses (SMBs), and Notebooks. Dell has struggled in the consumer market, losing share to Hewlett-Packard (HPQ) over the past few years.
The company is designing new, innovative products with faster development cycles and competitive features. Dell believes that personalization and mobility will be the drivers for the consumer market, which IDC expects to grow to 148 million units in 2011 from the 90 million in 2006, a CAGR of 11%. To address the distribution problem, Dell entered the retail channel in order to better serve the consumer market. We believe this will help the company.
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Read the full analyst report on HPQ
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