Dell cuts full-year revenue forecast on PC chip shortage

Dell Technologies cut its full-year revenue forecast on Tuesday as its PC business grapples with a shortage of chips from Intel, sending its shares down nearly 5% in extended trading.

Dell is the third-biggest PC maker after China’s Lenovo and HP, with the business accounting for nearly half of its total revenue.

“Intel CPU shortages have worsened qtr-over-qtr, impacting our commercial PC and premium consumer PC Q4 forecasted shipments,” Chief Operating Officer Jeffrey Clarke said on a post-earnings call with analysts.

Intel said last month that demand for its processors used in PCs was outstripping its ability to add capacity, prompting it to rely on contract manufacturers to ease shortages.

Dell’s PC business had a strong quarter, with sales rising 4.6% to $11.41 billion and mirroring upbeat results from rival HP, which also reported earnings on Tuesday.

Revenue from Dell’s server and networking unit, however, dropped 16% to $4.24 billion in the third quarter ended Nov. 1, while sales in its VMware unit rose 11.4%.

The PC maker said excluding China, its server business was down mid- to high-single digits in the quarter and that demand for servers will “remain challenged.”

The company cut its fiscal 2020 revenue forecast to between $91.5 billion and $92.2 billion from between $92.7 billion and $94.2 billion.

The Texas-based company reported total revenue of $22.84 billion for the latest quarter, narrowly missing estimates of $23.04 billion, according to IBES data from Refinitiv.

Dell’s net income was $552 million, compared with a loss of $895 million a year earlier.

Excluding items, the company earned $1.75 per share, while analysts were expecting a profit of $1.62 per share.