Dell and HP Shares Decline Following Revenue Dip

Dell Technologies, recently criticized by top reviewers in Australia for their notebooks, has seen a significant drop in its stock price after reporting a decline in revenues. This dip in consumer revenue was particularly alarming, falling 18% to US$2 billion as the company struggled to launch new, innovative notebooks.

After the report was released, Dell's stock plummeted over 11% in after-hours trading, and it has declined nearly 25% over the past six months. The revenue drop was particularly felt in Dell's client solutions group, which includes personal computers and laptops, where revenue fell 1% year-on-year to $12.1 billion.

Looking at the future, Dell forecasts its revenue for the upcoming fourth quarter to be between $24 billion and $25 billion, which is below the average analyst expectation of $25.57 billion. Analysts from Deutsche Bank speculate that the weaker forecast for Q4 stems from delays in AI server sales and diminished demand for PC upgrades.

Adding to the controversy, Nick Ross, a noted PC reviewer and owner of the 'High Performance Laptops' website, called for a boycott of both Dell and Alienware, claiming that the companies' actions severely impacted him. His statements have sparked a larger discussion about the relationship between tech companies and media outlets, especially regarding the influence of public relations firms in garnering favorable reviews.

The decline in Dell's stock and consumer revenue coincides with the exit of Dell's Alienware range from the Australian retail chain JB Hi-Fi. This has raised concerns about both Dell Technologies and HP, as both companies have projected lower-than-expected earnings for the upcoming quarter. This decline is partly due to a lack of demand for premium-priced AI notebooks.

As a result, the shares of both Dell and HP have dropped by an average of 12%. HP's stocks dipped to above $34, which puts them on track for their worst daily loss since March 2020, when the stock fell over 14% in a single day. Dell has said it expects revenues to fall within the range of $24 billion to $25 billion with adjusted earnings of $2.50 per share, missing the projected earnings of $2.65 per share by analysts.

HP, meanwhile, forecasts its earnings per share for the first quarter to range between 70 cents and 76 cents, which is below the 85 cents projected by analysts. Despite these challenges, Dell's COO, Jeff Clarke, mentioned that the AI market presents a 'robust opportunity', noting that while Dell's AI business may face fluctuations, there are no signs of it slowing down.

In contrast, HP's personal systems segment, which encompasses personal computers, saw a year-over-year revenue increase of 9% to $11.5 billion. HP's printing division also saw slight growth, with revenues rising 1% to $4.5 billion this quarter. Bernstein analysts have pointed out that HP’s guidance indicates a potential for an unusually back-loaded year, driven by expected strong margins in its printing division and robust growth in PC upgrades.

Analysts at Morgan Stanley echoed similar sentiments, indicating that both HP and Dell might be in for a more back-loaded fiscal year. They noted that an aligned full-year guidance alongside a sub-seasonal first quarter forecast suggests challenges ahead for the market.

Dell, HP, Revenue