Technology stocks across the world were dealt a blow Friday when Dell warned that second-quarter revenue is expected to show only a 4.2% increase to $14bn, and said earnings per share will be well below the $0.32 expected by analysts at $0.21 to $0.23 due to “aggressive pricing in a slowing commercial market.”
Dell shares plunged 12.44% to $19.35 as the news from the world’s largest PC maker was seen as evidence that the whole industry faces slowing demand.
Coming in the wake of a disappointing second quarter from Intel Corp when profits fell 57% and it slightly missed revenue targets, Dell’s warning was taken as an indication that corporate customers had slammed the brake on spending.
As a member of the triumvirate of companies that profited hugely from the rise of Windows, Dell, like Microsoft and Intel, now faces a period of readjustment to get its operations back on track. After enjoying years of double-digit growth, Dell saw its revenue rise slow to 6.2% in its first quarter and now is in for a sustained period of slower growth.
The Round Rock, Texas-based company quoted the most recent IDC numbers, showing it had gained 1 share point sequentially in the worldwide PC market, achieving a record 19.2% share, as the industry moves into a new phase of consolidation. Dell said its leading global share reflects customers’ confidence in Dell and its direct model throughout the world.
The company said it continued to make significant investments in customer service and support capabilities. It said it is seeing positive results and would continue to invest to drive a superior customer experience.
It said it had also made significant investments in its products and expects to deliver a greatly expanded product line in the second half of the year.
CEO Kevin Rollins said: All of our initiatives are focused on providing the best value, experience, and products to customers every day, which will maximize shareholder value over the long term.