Dell issues another profit warning in response to lower PC demand

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Dell issues another profit warning in response to lower PC demand

Antony Savvas

Dell shares slumped to a ten-year low after the firm issued a profits warning yesterday.

The world's number two PC maker by volumes shipped said there was a continuing decrease in end-user PC demand.

Dell said, "When Dell announced second quarter financial results on 28 August, it reported continued conservatism in IT spending in the US, which had extended into Western Europe and several countries in Asia. The company is seeing further softening in global end-user demand in the current quarter."

In the last year, Dell has seen its number one PC provider spot usurped by Hewlett-Packard. HP recently posted better financial results than Dell, but this week announced 26,000 redundancies as part of its attempts to cut costs and integrate the £7.2bn acquisition of EDS.

Dell said, "The company expects to incur costs as it realigns its business to improve competitiveness, reduce headcount and invest in infrastructure and acquisitions, but is committed to working aggressively on cost initiatives, that will benefit its profit and loss sheet over time with improved growth, profitability and cash flow."

Dell has not denied reports that it plans to dispose of its PC manufacturing plants in favour of using contract manufacturers to cut costs. Such a move would lead to many thousands of redundancies worldwide, including at its major facility near Limerick in the Irish Republic.

Dell said the company "grew unit shipments faster than the industry in the first half of calendar 2008, and expects to grow faster than the industry for the full year". Dell, however, has seen its profit margins slip.

Dell will post its third quarter results on 20 November.


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