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Dell sees 'stability,' not growth

Profits drop 23% on weak corporate sales

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Dell sees stability returning to the PC market during its fiscal second quarter, but not a lot of growth.

Weak technology spending sank Dell's revenue across all major business units compared to the same period ended July 31 last year.

Dell's revenues totaled $12.76bn in its fiscal second quarter, down 22 per cent from the same period last year. Net income also fell 23 per cent to $472m year-over-year.

Enterprise sales were down 32 per cent to $3.3bn from the same period last year, but up 3 per cent sequentially. Dell said there was lowered IT spending by large companies in all major regions of the world, and it expects spending to remain at that level for the rest of the year.

The company expects relief to come from a refresh cycle in commercial accounts sometime in 2010 with spending improving first in the US. Dell's enterprise sales account for about 80 per cent of Dell's revenue.

Public segment revenue fell 16 per cent to $3.8bn, but it was up 20 per cent sequentially. The company said growth in larger government accounts and seasonal education business helped offset weaker demand in other parts of the public unit like state and local government and health care.

Small and medium business revenue dropped 29 per cent to $2.8bn year-over-year, and fell 5 per cent sequentially.

Consumer revenue was down 9 per cent year over year, and up 2 per cent sequentially.

"If current demand trends continue, we expect revenue for the second half of the year to be stronger than the first half," chief executive Michael Dell said in a statement. "We are expanding our capabilities in enterprise technology and services and investing in or core business to distinguish Dell both with customers and in operating performance."

Meanwhile, Dell is cutting costs with layoffs, restructuring and using more contract manufacturing.

"The best path for Dell remains one focused on profitable growth, lower costs and smart use of working capital," said Brian Gladden, Dell's chief financial officer in a statement.

For the third quarter, Dell expects seasonal demand improvements from both consumers and US government business. However, it warns Q3 is generally a slower period from large commercial customers from US and Europe. ®

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