The chief executive of Dell on Thursday outlined a plan to correct stumbles at the world’s biggest computer maker, whose dominance of the PC market has been challenged this year amid falling prices and a turnround in fortunes at Hewlett-Packard, its biggest US rival.
Among other moves, Mr Kevin Rollins said the company planned to end two decades of exclusive reliance on Intel microprocessors by introducing microchips made by Advanced Micro Devices into some its high-end server lines.
The shift in strategy came as Dell reported an 18 per cent decline in quarterly profits. The slide, which followed a profits warning last week, marked the third time in four quarters that Dell’s quarterly results have fallen short of Wall Street expectations.
“The market intensified more than we understood or acknowledged early in the year,” said Mr Rollins, explaining the company’s recent troubles. “Some of our competitors are a little stronger than we thought.”
Dell has suffered this year from falling margins, customer service problems, and improvements at HP following a $1.9bn restructuring under chief executive Mark Hurd.
HP earlier this week reported profits and sales ahead of expectations, as cost cuts boosted margins across the business.
HP’s resurgence, coupled with a fall in average selling prices for computer equipment driven by increased competition from low-cost Asian producers, have combined to challenge Dell’s traditional dominance of the personal computer market.
Mr Rollins said Dell maker planned to “reignite growth” by changing its price position, investing in customer service, and accelerating $3bn worth of cost cuts aimed at boosting productivity.
Dell reported first-quarter earnings of $762m, a decline of 18 per cent from $934m in the first quarter last year. Revenues were $14.2bn, an increase of only 6 per cent over last year – well below Dell’s traditional pattern of revenue growth in the the the traditional mid-to high teens.
Dell said it expected results next quarter to be “similar” to its first-quarter results, and announced that it would end its practice of providing specific quarterly earnings and sales guidance.
Dell’s shares, long considered a must-own among technology stocks because of the company’s history of outperformance, have tumbled more than 40 per cent from a July high of $41.54.
By contrast, HP’s shares have risen about 57 per cent since Mr Hurd took over as chief executive last year.
Dell’s shares rose 1.4 per cent on Thursday to $23.95 ahead of the announcement.