Dell quarterly profit falls; shares down

BOSTON (Reuters) - Dell Inc posted a worse-than-expected 17 percent drop in net profit and said conservative technology spending in the United States was spreading to Western Europe and Asia, driving its shares down 10 percent.

Dell's fiscal second quarter profit, excluding some items, was 33 cents per share, missing the average analyst forecast

of 36 cents, according to Reuters Estimates.

COMMENTARY:

TIM GHRISKEY, CHIEF INVESTMENT, SOLARIS ASSET MANAGEMENT, WHICH MANAGES OVER $2 BILLION

"They're saying lower IT spending is spreading. That is evidence of a global slowdown in IT spending. This certainly isn't good news for tech overall. Dell's outlook is for slower spending - especially in Asia and Western Europe."

"We would expect the tech group to suffer when the market opens tomorrow morning and overnight as well."

"It looks like Dell's margins were bad. Not surprised to see their margins affected given their change in distribution outlets that they are using, their contributed expansion out of direct sales and to third parties.

SHANNON CROSS, ANALYST, CROSS RESEARCH

"We've got a real weak economy pretty much across the board except for emerging markets, and in order to sell and to move product, people have to price aggressively."

"It's a really tough tech market and Dell is obviously cutting costs, but it wasn't enough to offset the pressure on gross margin. What people on the Street wanted to see was revenue growth and a solid gross margin number. Because if you sell things for no profit, to some extent, what's the point?"

"This indicates that they might have to streamline even more now."

JOHN MENZIES, PORTFOLIO MANAGER AT SAN FRANCISCO-BASED INVESTMENT BANK PACIFIC GROWTH EQUITIES

"The thing that is concerning and the thing that is making the stock go down is they're starting to talk about demand destruction in Western Europe and in Asia.

Up until this point the large tech companies, like the IBMs of the world, have done pretty well in holding up their earnings because they've had strong and consistent international demand. But this shows international economies are slowing down and Dell cited that specifically.

That probably was reflected in the margins, which were short of expectations, which effectively means these guys didn't have the pricing power that they wanted and that was why there was a miss on their EPS.