Wednesday 28 June 2017

Dell drops as sluggish spending by consumers weighs on its sales

Dell, the second-largest personal computer maker, fell the most in more than a year in Nasdaq trading after slower spending on PCs and consumer technology crimped its sales forecast.

The company projected sales growth of 1pc to 5pc this year, down from a previous range of 5pc to 9pc. Second-quarter sales rose less than 1pc to $15.7bn (€10.8bn), Round Rock, Texas-based Dell said yesterday.

Analysts had estimated revenue of $15.8bn in the period, which ended July 29, according to Bloomberg data.

Lacklustre demand from consumers and market-share gains by Apple weighed on results, offsetting stronger corporate orders for server computers.

Households have stepped up purchases of tablets and smartphones, while curtailing purchases of PCs, Dell's mainstay.

Renewed concerns that the US economy will fall back into recession also may be curbing spending.

"The macroeconomic environment has weakened not only here in the US, but globally," said Shaw Wu, an analyst at Sterne, Agee and Leach in San Francisco. He has a "neutral" rating on the shares.

"The guidance is definitely disappointing, and that's the main reason why the stock's off," he said.

The stock dropped $1.19, or 7.5pc, to $14.61 on Nasdaq. It fell as much as 8.2pc earlier in the session, the biggest intraday drop since May 2010.

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 have also delayed spending. The public sector accounts for more than a quarter of Dell's sales. (Bloomberg)

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