By Poornima Gupta
SAN FRANCISCO Nov 15 Dell Inc's
third-quarter profit slid 47 percent, hurt by lower PC sales,
weaker demand from large corporations and the shift to mobile
Dell's consumer PC business is struggling as more and more
consumers are using smartphones and tablets to do basic
computing, and the company's corporate customers continue to
defer spending due to the uncertain state of the economy.
The No. 3 personal computer maker warned that it "sees the
challenging global macroeconomic environment continuing in the
The company, once the world's top PC maker and a pioneer in
computer supply chain management, is struggling to defend its
market share against Asian rivals like Lenovo. It is
trying to bolster growth by focusing on products and services to
The company said it expects revenue to grow as much as 5
percent in the current quarter.
"Our outlook for the quarter would be generally consistent
with what we typically see in terms of a seasonal pickup," it
Dell said revenue in its fiscal third quarter fell 11
percent to $13.7 billion, slightly lower than the average
analyst estimate of $13.89 billion according to Thomson Reuters
It posted net income of $475 million or 27 cents a share in
the quarter, compared with $893 million or 49 cents a year
earlier. Excluding certain items, it earned 39 cents a share,
compared to an average forecast for 40 cents.
Chief Financial Officer Brian Gladden said in an interview
that corporate customers continue to defer technology spending.
"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 said.
Dell's enterprise solutions revenue rose 3 percent to $4.8
billion, while server and networking revenue climbed 11 percent.
In contrast, consumer revenue plummeted 23 percent to $2.5
billion, underscoring the plight of the broader PC market, and
sales to large corporation declined 8 percent to $4.2 billion in
Dell's "challenges are frankly the same as before - namely
the tough macroeconomic environment and cannibalization from
mobile devices using mobile operating systems from Apple
and Google," Shaw Wu, analyst with Sterne
The consumer market is improving with the launch of the
Windows 8 software from Microsoft, which has been
designed with touchscreen devices and Internet-based computing
in mind, Gladden said.
But sales of devices featuring the Windows 8 software have
yet to ramp up while Microsoft is already in the market with its
new Surface tablet computer, which may hurt PC sales.
PLANNING FOR "FISCAL CLIFF"
Apart from the consumer, Dell's business customers have held
back spending, which could be partly attributed to the looming
fiscal cliff, Gladden said.
The fiscal cliff involves $600 billion in automatic tax
hikes and spending cuts effective in early 2013 if U.S.
lawmakers fail to agree on reducing the budget deficit.
The cuts could take a toll on consumer and government
spending and cause the economy to stall.
"I would tell you that the behavior we are seeing from our
customers today is actually driven by that uncertainty," Gladden
said. "It's not like it's all going to happen overnight. It's
affecting our business today."
Dell is ensuring that it has access to cash in case there is
no congressional action.
"I would say there are several things we are doing from a
planning standpoint, especially on the treasury side to ensure
that we are in a position to have appropriate access to
liquidity," Gladden said, adding that Dell is making sure it has
access to lines of credit and commercial paper.
Dell shares fell 2.3 percent to $9.36 in after-market trade
from its close of $9.56. The shares initially rose following the
release of the results.