Last updated: November 15, 2012 11:49 pm

Dell suffers in shift away from laptops

Dell’s consumer business contracted by almost a quarter as it lost market share to Asian PC makers and people bought smartphones and tablets in preference to its laptops.

The Texas-based computer maker reported revenues and profits below Wall Street’s already lowered expectations for its third quarter ending November 2, but blamed a difficult macroeconomic environment for its troubles.

Dell warned in August that revenues would fall 2 to 5 per cent from the second quarter. Analysts at the time had been forecasting a 3 per cent rise to $14.9bn.

The company fell short of its own expectations – revenues of $13.7bn were down 5.3 per cent on the previous quarter and 11 per cent year-on-year.

Wall Street expected $13.9bn in revenues and earnings per share of 40 cents – Dell reported 39 cents.

Consumer sales were the hardest-hit area of the company’s business – down 23 per cent at $2.5bn – while Europe fared worst geographically, with revenues down 15 per cent.

“In end-user computing, we have work to do, but are encouraged by early interest in our new Windows 8 touch portfolio,” Michael Dell, chief executive, told an analyst conference call.

Sales of PCs had slowed ahead of the Windows 8 launch on October 26, the week before Dell’s quarter ended. The company said the transition to Windows 8 had put pressure on its earnings, but it expected the situation to ease.

Dell’s PC shipments fell nearly 14 per cent year-on-year in the third calendar quarter as Lenovo of China and Asus of Taiwan continued to gain ground, according to the Gartner research firm.

Analysts say Dell has become sandwiched between lower-cost players such as Lenovo and encroachments by Apple and Google into its core PC business from their own devices, including smartphones and tablets.

“Industry growth in this space continues to occur predominantly in the low value and entry-level desktop [PCs] and notebooks, where we’ve chosen not to participate, and in tablets,” Steve Felice, chief commercial officer, told the call.

Dell has been reducing its dependence on PC sales by focusing on business products. It said revenues for its Enterprise Solutions and Services division grew 3 per cent to $4.8bn, with server and networking products a highlight here, growing 11 per cent.

Profits, excluding acquisition-related costs and other items, fell 31 per cent to $679m. Dell maintained its forecast of $1.70 in earnings per share for the full year.

Its shares traded 1.6 per cent lower at $9.41 in extended trading in New York on the news. They have fallen 35 per cent so far this year.

The company has softened the blow to investors with a dividend and share buybacks. It said these amounted to almost $900m so far this year. The company paid the first cash dividend in its history last month.

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