Dell Blames the Sales Team for Tumbling Profit


Shutterstock photo

It was not a good second quarter for Dell (NASDAQ: DELL ), as the company dropped up to 13% in German trading after reporting revenue that missed analyst expectations.

Dell reported that revenue for the quarter ending July will be between $14.7 billion and $15 billion. The average estimate came in at $15.4 billion.

Dell's president, Steve Felice, said in a conference call that this forecast alongside disappointing first quarter sales, are a direct result of the fact that the Dell sales team has been focusing on individual products rather than packages of hardware and software.

This is an interesting way to look at the miss. Every sales team in the world will tell you that the key to success is to upsell. If a customer wants something, the average sales representative will tell you that you need more. It's hard to imagine that the Dell sales team was not doing that. It's far easier to imagine that the current economic climate has been restricting consumers' ability to purchase more than what they absolutely want.

CEO Michael Dell said pretty much that very thing. "In my own interactions with larger customers, we are seeing a delay and pause in spending activity. Corporations are still adopting Windows 7."

The numbers don't make for happy reading, with shares dropping down to $13.3 in U.S. trading late on Tuesday. Dell stock had climbed 3.1% previously in 2012.

1Q net income came in at $635 million, or 36 cents per share, compared with $945 million, or 49 cents per share, the previous year. Swing that whichever way you want, but that's a startling decline. Sales fell 4% to $14.4 billion compared with the average estimate of $14.9 billion.

Dell has to start thinking, and fast. The company needs to innovate, because its notebook sales are dropping like a lead balloon thanks to competition from Apple's (NASDAQ: AAPL ) iPhone and iPad, and other similar mobile devices. Dell is being left behind.

Dell is now the third biggest computer maker behind Gartner (NYSE: IT ) and the market leader Hewlett-Packard (NYSE: HPQ ). Consumers are holding off buying a PC this year as they wait for Microsoft's (NASDAQ: MSFT ) Windows 8 to drop but Dell absolutely should not be looking at that product as a saving grace as all of the manufacturers will feel the benefits of that.

Follow me @BCallwood .

(c) 2012 Benzinga does not provide investment advice. All rights reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Earnings
Referenced Stocks: AAPL , DELL , HPQ , IT , MSFT

More from Benzinga




Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by