Dell slashes 2012 sales forecast

Dell Inc has slashed its 2012 revenue forecast as an already weak outlook for technology spending this year worsened, sending its shares more than 7 per cent lower. The No. 2 personal computer maker cut its full-year revenue growth estimate to just 1 to 5 per cent, from 5 to 9 per cent previously, citing growing uncertainty about whether government and corporate spending on everything from servers to software can hold up in the face of flagging economic growth.Dell’s move did not bode well for rivals such as Hewlett-Packard Co. Shares of HP, a more diversified computing hardware and services vendor than Dell and more reliant on consumers, slid 1.3 per cent.Industry executives warn that corporate and government spending may have begun to wane on fears of a second-half economic growth slowdown, while a high jobless rate pressures consumer income.HP, the world’s No. 1 PC maker, striving for a turnaround after several disappointing quarters, will report quarterly earnings on Thursday. “We are going to see similar trends” with HP, said Brian Marshall, analyst with Gleacher & Co, noting “maybe some weakness on the topline.”He also noted a “pause” in technology business spending.The company founded by Michael Dell has consistently beaten Wall Street expectations this year, a result of expanding its footprint in higher-margin businesses such as servers, storage and computer services.“From a market standpoint, clearly there’s a different demand dynamic as you think about revenue growth,” Dell Chief Financial Officer Brian Gladden said in an interview. “It’s a bit of an uncertain environment.” Dell slid 7.65 per cent to $14.60 after hours, from a close of $15.80 on Nasdaq. Before on Tuesday’s results, many analysts had already lowered their calendar 2011 projections as global markets tanked and economies headed for choppy waters. Corporations like Dell may be forced to reduce their full-year targets as demand slows. During an annual analysts’ day in June, executives pledged to maintain their pace of acquisitions -it completed its $960 million purchase of Compellent in February -to gain access to corporate clients, and to safeguard margins.But Wall Street on Tuesday focused on anemic revenue growth, ignoring a 22.5 per cent gross margin in the second quarter that actually exceeded analysts’ projections by more than a full point.Dell, which in May forecast strong government spending and a good back-to-school season, recorded sales of just under $15.7 billion in its fiscal second quarter ended July. That marginally missed the $15.76 billion average forecast of Wall Street analysts polled by Thomson Reuters.It added that sales this quarter would likely stay flat from last quarter.Dell posted net income of about $890 million, or 48 cents a share, in the quarter ended July, versus $545 million, or 28 cents a share, a year earlier. Excluding certain items, it earned 54 cents a share. Analysts had expected 49 cents, according to Thomson Reuters, but it was not immediately clear if that estimate was comparable. In cutting its full-year revenue forecast, Dell cited “a more uncertain demand environment” and a strategy shift aimed at boosting sales of higher-margin products. Government customers also have delayed spending. The public sector accounts for more than a quarter of Dell’s sales.Even as Dell tempered its revenue outlook for the year, it said operating income would increase by as much as 23 per cent, up from a previous forecast of up to 18 per cent. Acquiring technology for data centers and discontinuing sales of less profitable products have improved results, executives said.On a conference call, Chief Executive Officer Michael Dell said the company would keep making acquisitions and maintain its focus on midsize business customers. “You’ll see us continue to identify opportunities in a disciplined way that will generate profitable growth,” he said.The company has been making deals to expand in data storage, networking and software. On July 20, Dell announced plans to buy networking company Force10 Networks Inc., which it said had about $200 million in sales. From / Gulf Today