Dell warned on Tuesday that a slowdown in IT spending was worsening, sending shares of the PC maker down 10 per cent to a 10-year low.
“The company is seeing further softening in global end-user demand in the current quarter,” the Texas-based company said in a statement.
The warning came less than three weeks after it cited “continued conservatism in IT spending in the US”, in its second-quarter earnings report. This had extended into Western Europe and several countries in Asia.
Dell shares were down 10 per cent at $16.23 in midday trading in New York, reaching their lowest level since 1998.
Dell’s second-quarter results had disappointed, with profits falling 17 per cent as price cuts in Europe hit margins.
The company is cutting costs to try to boost margins. It has said it intends to cut $3bn in annual costs during the next three years. In August, it said it had cut 8,500 jobs out of a planned 8,900.
Dell said it expected to incur costs as it “realigns its business to improve competitiveness, reduce headcount and invest in infrastructure and acquisitions”.
Dell’s bigger rival, Hewlett-Packard, has fared better recently, beating Wall Street estimates in its last quarter. However, it forecast slower sales in the current quarter amid a slowdown and the strengthening of the dollar, which could blunt HP’s advantage in overseas markets.
HP announced on Monday that it would cut almost 25,000 jobs over the next three years as it integrated its Electronic Data Systems acquisition.
Michael Dell, founder, reassumed control of Dell last year to try to arrest its slide to the number two position, behind HP.
He has cut thousands of jobs and tried to move beyond Dell’s direct-sales model, which had been central to its earlier success. He has struck deals to sell computers in thousands of retail stores worldwide and has also embraced resellers – companies that install computer systems for business.
Sales have been boosted but the new business has been less profitable than direct sales.
Dell said it grew unit shipments faster than the industry as a whole in the first half of the calendar year, and expected to grow faster than the industry for the full year.
The PC maker was reported this month to be considering selling its factories to increase profitability. It would use contract manufacturers instead.
Dell did not deny the reports but said it would not comment on speculation.
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