Dell misses target as PC market shrinks

Dell's global revenue forecast for the third quarter has taken a severe hit and the company has slashed its annual profit outlook by 20%. According to reports, the last three months have been particularly tough for the company as competition from Apple's iPad and weak global economic recovery has brought down PC demand. With consumers increasingly favoring iPad and other tablet computers over conventional machines, the market could continue on its downward trend.

 

The company's strategy of focusing on other growth engines such as storage, networking products and enterprise services has also moved at a slow pace and has not been able to compensate for the consistent decline in sales of desktops and laptops, which account for almost half of the revenue.

Dell has always banked on the consumer segment to drive its sales but surprisingly this time only 18% revenue came from this segment. The effect of this can be seen in NYSE where Dell fell 5.4% to $11.68 at the close the biggest decline since May 23. The stock has lost 20% this year.

Revenue in the current quarter that ends in October will decline 2% to 5% from the prior three-month period. Fiscal 2013 earnings excluding some items will be at least $1.70 a share, including a 2 to 3 cent dilutive impact from the pending acquisition of Quest Software Inc. (QSFT) . That's less than the company's February projection of at least $2.13 a share, and also missed the average $1.90 estimate.

The Microsoft operating system, designed to run on tablets as well as traditional PCs, may give PC makers a counterweight to Apple's iPad in the touch-screen device market.

Dell is one of four leading PC makers that Microsoft said would offer tablets using Windows RT, a version of the software tailored for chips from ARM Holdings Plc.(ARM) Gaining a presence in tablets is important for Dell, which had so far said that desktop and laptop sales will be little changed over the next 3 years.