Shrinking PC Sales Impact Dell's 3Q Forecast

By Ashok Bindra August 22, 2012

With PC sales falling across the globe, Dell Inc.’s overall revenues are also shrinking. Hence, Bloomberg Businessweek reports that Dell’s revenue for the third quarter (3Q) has fallen below the analyst estimates.

Businessweek reported that with PC sales declining worldwide and global economic recovery slowing down, as well as strong competition from Apple’s iPads, Dell has dropped its profit outlook by 20 percent as 3Q forecast misses analysts’ estimates.

Dell’s strategy of using acquisitions to add software, storage and networking equipment has been slow to offset declining sales of desktops and laptops, which account for half of revenue. The report shows that consumers and businesses are increasingly adopting iPads and other tablet computers over traditional PCs and laptops.

 In a statement, Frank Gillett, an analyst at Forrester Research, said, “It’s a half-decade journey or more for Dell to transition from where they have been to more enterprise sales. It’s a long transformation project.”

 According to Businessweek, 18 percent of revenue was from consumers last quarter, it’s subject to long upgrade cycles for PCs running Microsoft operating system, noted Gillett. The next version, Windows 8, is due out in October.

The Forrester analyst thinks that in general companies are slow to do upgrades and they’re being even more conservative this time.

Dell’s chief financial officer Brian Gladden told analysts in a conference call on Tuesday that business customers are taking “a wait-and-see approach” on forthcoming tablets based on Windows 8.

 In a released statement, Dell reported that revenue in the current quarter that ends in October will decline two percent to five percent from the prior three-month period. That’s the equivalent of $13.8 billion to $14.2 billion in sales, less than the $14.9 billion average analyst estimate, according to data compiled by Bloomberg.

 Meanwhile, Businessweek report shows that Dell has agreed to buy software company Quest for approximately $2.4 billion. To gain desktop units used by cloud computing customers, Dell bought closely held Wyse Technology in May.

Edited by Amanda Ciccatelli

TechZone360 Contributor

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