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Taiwan quake blamed for Dell profit slip

Customers to shoulder increased PC prices

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Dell has warned that its third quarter profits will not be up to scratch because of the after effects of the Taiwanese earthquake. The direct PC seller said chip shortages resulting from last month's quake would effect profit for the three months ending 31 October. The 25 per cent hike in contract chip prices experienced over the last week will eat into earnings in the short term, though Dell said it intended to pass on the price rises immediately to customers it had contracts with. Dell's results are due to be posted on 11 November, with analysts forecasting that the company's profits will drop between two and three cents per share. This would result in around 18 cents a share, according to analysts. Jonathan Ross, PC analyst with ABM Amro, said in the Wall Street Journal: "The bottom line is PC demand really accelerates from here. "It's hard to get too optimistic about DRAM pricing in the fourth quarter given that the PC manufacturers are already on allocation." Dell estimated that chip price increases had added $70 to $75 to the cost of one of its PCs. It said the latest round of DRAM price hikes were too steep to absorb without an impact on its profits. Michael Dell, Dell's CEO, said: "We think there is a unique set of events here that have conspired against us in a negative fashion." The PC giant plans to up prices on certain products and encourage users to buy PCs with smaller memory. It said it expected to have soaked up the increases by its fourth fiscal quarter, ending 31 January. Dell's shares dropped $1.50 to close at $41.31 on Nasdaq yesterday. ®

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