Dell warns on outlook after Thai floods

Dell missed Wall Street sales expectations in its most recent quarter and steered down its projections for the current one, citing flooding in Thailand and an uncertain outlook for the world economy.

The number three computer seller by volume said sales in its fiscal third quarter came to $15.4bn, flat compared with a year earlier and below an analyst consensus of $15.7bn, gathered by Bloomberg. Earnings rose 9 per cent to a better than expected $893m, or 49 cents a share, as the company increased its overall margin.

The Texas-based company has been focusing on higher-margin sales to companies and has been turning its back on the low-price consumer PCs that made its name. It now trails US rival Hewlett-Packard and China-based Lenovo in unit shipments.

Jeff Clarke, vice-chairman of global operations, told analysts that the company, based in Round Rock, Texas, had walked away from $2bn worth of business at the low end. Its large enterprise, public and small and medium business divisions are each bigger than the consumer unit, where revenues fell 6 per cent to $2.8bn year on year.

The company said its European consumer business had stabilised, Asia-Pacific had shown strong growth, but the US had declined as Dell continued to remove itself from low-value businesses.

For higher-margin products, Dell said revenues for its XPS high-end notebooks were up 207 per cent year on year, while the company planned its first entry in the new “ultrabook” category of laptops costing about $1,000 before the end of the fiscal year.

Sales to the biggest business customers rose 4 per cent to $4.5bn as service revenues grew 14 per cent year on year.

But sales to public bodies were down 2 per cent at $4.4bn, with weakness reported in western Europe and US federal government spending.

Dell shares fell 2 per cent in after-hours trading, giving up the gains of the regular session. They have risen 15 per cent so far this year.

“We continued to see excellent momentum in our enterprise business, with double-digit revenue growth in services, servers and networking and in key growth countries, despite some macroeconomic uncertainty,” said Brian Gladden, chief financial officer.

The flooding in Thailand has affected some of the biggest makers of hard drives, a key PC component. Mr Gladden told reporters that the company had made strategic purchases of inventory to cope with shortages expected to last until the end of the next quarter.

However, he said the continuing uncertainties meant Dell was looking at the bottom of the range of its forecast for the fiscal year ending in January, of 1 per cent to 5 per cent sales growth.

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