Profits plummet at Dell

By John Leonard
16 Nov 2012 View Comments
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Dell, once the world's biggest PC maker, has seen its quarterly profits slump by 47 per cent year on year to $475m (£300m), with sales to both consumers and businesses down.

Third-quarter revenues from consumers were hit particularly hard, falling 23 per cent to $2.5bn (£1.6bn) as Dell found itself squeezed at the low-cost low-margin end of the business by current number one Lenovo and other Asian vendors, while at the same time losing a share of the casual computing market to tablets and smartphones by Apple, Google and Samsung.

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Sales to corporations fell by eight per cent to $4.2bn (£2.65bn) in the same period as businesses delayed shelling out for large deployments in the face of economic uncertainty, particularly in the US, which is on the brink of a "fiscal cliff".

"I would tell you that the behaviour we are seeing from our customers today is actually driven by that uncertainty. It's not like it's all going to happen overnight. It's affecting our business today," said chief financial officer Brian Gladden in a press interview.

"It's not clear what's going to cause them to increase their spending in the short term, given the uncertainty in the economy," he continued.

However, it's not all doom and gloom for the Texas-based firm, which for some years now has been persuing a strategy of moving away from its original PC business. Revenue from enterprise solutions rose three per cent to $4.8bn (£3bn), while server and networking revenue climbed 11 per cent to $2.3bn (£1.45bn), based largely on strong sales of new PowerEdge servers designed for large-scale cloud environments.

Windows 8 may yet produce a boost by increasing demand from consumers, too, although Microsoft's own foray into this market in the shape of the Surface may hurt sales of Dell's laptops and PCs.

"In end-user computing we have work to do, but are encouraged by early interest in our new Windows 8 touch portfolio," said CEO Michael Dell, on an analyst conference call.

The company expects to see total sales rise by about five per cent in the coming quarter, to around $14.4bn. This will still represent a year-on-year decline, however.

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