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Michael Dell: PC profits plunge not down to tablets

It was floods and the economy – anyway we're buying cloud startups now

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The sluggish demand for PCs that saw Dell's profit dive below Wall Street estimates in the last quarter is not due to tablets, Dell CEO Michael Dell said yesterday.

Despite Dell's PC revenues falling 6 per cent in the third quarter of 2011, PCs are still selling better than tablets he told a conference in Bangalore, describing fondleslabs and their ilk as "additional" devices that won't dent PC sales.

"If you look at the tablet, it's a very interesting and exciting device. It's basically an additional device," Dell said as reported by Reuters. "In other words, if I get a tablet I don't get rid of my smartphone. If I get a smartphone, I don't get rid of the PC either."

Far from being threatened by new mobile devices, data-crunching smartphones and 3G tablets actually provided a growth opportunity for Dell, said its CEO, as the new data centres needed to service the 3G and 4G networks created demand for Dell-made server kits.

Eyes on the cloud

But despite Dell's bullish pronouncements on the PC biz, he reiterated how keen the company is to push away from hardware into providing services and cloud products to business: a sector with higher profit margins than the consumer market. Dell announced that it was keen to acquire small and medium businesses with useful new technology in the cloud and service sectors and that they had serious bucks to spend: "You will see us be a serial acquirer using our strong cash flows to enhance our growth and add to our development capability".

In its latest financial filing, for quarter three 2011, Dell blamed a challenging financial climate for the slump in its consumer sales. Revenue from selling desktops to consumers fell by 16 per cent. Strong competition from Chinese brand Lenovo forces Dell to lower their prices, but not enough to stop Lenovo overtaking Dell to become the No 2 computer manufacturer globally.

Dell said that the industry-wide shortage of hard drives following the Thai floods had also hurt yearly profits. ®

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