September 16th, 2008
Dell: Demand is worse than we thought; Ingram Micro agrees; Best Buy misses
Technology demand appears to be softening at a rapid clip. Dell said Tuesday that it is seeing “further softening in global end-user demand in the current quarter.” Here’s why that’s worrisome: Dell had a more positive outlook on Aug. 28, or a little more than two weeks ago.
Dell said in a statement that demand is slowing in Western Europe and several Asian countries. That’s not all that surprising given how the economies are shaping up over there. For its part, Dell said it’ll focus on its usual checklist: Consumers, enterprise, notebooks and emerging markets. IT also will continue to cut costs.
Ingram Micro echoed what Dell said. Ingram Micro, a massive technology distributor, cut its revenue and earnings target for its third quarter. Revenue is expected to be between $8.3 billion to $8.6 billion with earnings between $30 million to $39 million, or 18 cents a share to 23 cents a share. Wall Street was expecting earnings of 37 cents a share.
In a statement Ingram Micro CEO Gregory Spierkel summed it up:
“Earlier this month, we disclosed that softer economies created more competitive environments in July and August. It’s now clear that this economic softness is continuing into September, which is exerting greater pressure on operating margins. In Europe, we are not seeing the typical September bounce- back from the summer holidays. North America seemed to be relatively stable in the summer months, but we’re experiencing broad-based softness in September.”
And just to hammer home the bad news all at once. Best Buy missed Wall Street estimates with earnings of $202 million, or 48 cents a share, on revenue of $9.8 billion. Wall Street was expecting earnings of 57 cents a share.
Earnings were whacked by Best Buy’s “international expansion, investing in both people and technology to expand its presence in China and prepare for its first stores in Mexico and Turkey,” according to a statement. Best Buy did maintain its outlook for the year, but investors weren’t in the mood to believe management.
That’s not terribly surprising given what Dell and Ingram Micro are saying. It’s quite possible that Best Buy is ramping up just as demand is slowing abroad as well as in the U.S.
Despite those worries Best Buy has plenty of positive areas: Same store sales were up 4.2 percent, online revenue grew 32 percent and the retailer has an open field to run in relative to its competition. Best Buy CEO Brad Anderson acknowledged that the retailer has “some work to do in terms of managing our expenses amid a challenging macro economic environment.”
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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