Dell fans slowdown fears with weak revenue forecast

DELL Technologies joined rivals in predicting a slowdown as runaway inflation and the darkening economic outlook prompt consumers and businesses to tighten their purse strings, sending its shares down 8 per cent in extended trading on Thursday (Aug 26).

Industry majors from Intel to Lenovo Group have warned of a slump in the personal computer (PC) market after a 2-year boom during the pandemic, with research firm Gartner estimating shipments would drop 9.5 per cent in 2022.

While Dell’s enterprise-focused business has somewhat made up for the PC slowdown, company executives were cautious about the outlook for the unit that generates nearly half its revenue.

“There’s caution around future hiring, trade-offs within their IT budgets given the macroeconomic uncertainty, customers reducing the size of orders and buying for only immediate requirements,” co-chief operating officer Chuck Whitten said on a post-earnings call.

The company expects third-quarter revenue between US$23.8 billion and US$25 billion, below the US$26.34 billion estimated by analysts, according to Refinitiv data.

Revenue growth in the second quarter was the slowest in more than one and a half years as the company also took a hit from a surge in the dollar and Covid-19 flare-ups in China - its second-largest market.

The stronger dollar has pressured earnings of technology companies from Microsoft to Apple, and will likely continue to be a headache as the Federal Reserve raises interest rates.

Consumer revenue declined 9 per cent but was somewhat offset by a 15 per cent jump in the commercial business that benefited from businesses placing orders to gear up the hybrid-work era.

Infrastructure solutions group, home to the company’s storage business, grew 12 per cent to US$9.5 billion.

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Dell reported an adjusted profit of US$1.68 per share on revenue of US$26.43 billion, which was 9 per cent higher. REUTERS