Dell saw a 6.5 per cent drop in profits to $679m (£342m) in its fourth quarter, sparking fears that slower IT spending was starting to hit suppliers.

The company's shares fell more than 4 per cent in after hours trading.

Chief Executive Michael Dell said that that slower IT spending in financial services was affecting profits.

"We are seeing some conservatism in some IT spending in the US, especially in the financial services sector," he said.

Dell has been overhauling its business in the past year. Over the last eight months the company has reduced its global headcount by 3,200.

The company is making every effort to return to profitability.

"While Dell continues to drive towards a world-class cost structure and competitiveness we have much work to do," he said.

Last year Cisco systems warned that it was starting to see a slow down in IT spending as a result of the credit crunch.