Dell takes hit on faulty motherboards

Computing giant says it does not expect to hit its original predictions for Q305 revenue. The vendor’s stock price fell by 8% at the news.

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By  Simon Duddy Published  November 6, 2005

Dell has announced that it does not expect to hit its original predictions for Q305 revenue. This is due to a charge to fix faulty PC motherboards and a slowdown in UK and US business. Dell says it expects revenue to be approximately US$13.9 billion in Q305 versus its original guidance of US$14.1 to US$14.5 billion. Dell’s stock price fell by 8% at the news. The vendor is now unlikely to reach its projected annual 2006 revenue target of US$60 billion. Dell says it will take a charge in its fiscal third quarter of approximately US$450 million. More than US$300 million is associated with the cost of servicing systems that included a vendor part that “failed to perform to Dell's specifications”. The fault applied to a generation of OptiPlex desktop PCs. The charge also includes the costs of workforce realignment, product rationalisations and excess facilities. The shortfall in revenue versus previous guidance was also driven in part by the company’s US consumer and UK businesses, which fell short of expectations. Dell will announce the financial results for fiscal Q306 on November 10.

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