Dell Not Immune to European Slowdown

Echoing the predictions of other competitors in the PC arena, Dell Wednesday admitted that sales have slackened a bit and were not where they projected them to be.

Although the company remains optimistic about its profitability outlook for the third quarter, Dell acknowledged that European demand has been slow and that worldwide, small business sales have fallen short of expectations. If the softness persists in the fourth quarter, Dell’s full-year revenue could be $32 billion, an increase of about $7 billion, or 27 percent, from sales for fiscal 2000.

Despite the shortfalls, Dell said global sales for large corporation, schools and home PC sales continues to shine. The firm is on track to meet the company’s profit expectations for the third quarter, although
fourth-quarter per-share earnings could be one to two cents below company targets.

While Apple has blamed component shortages in part for lower earnings than expected, Dell claims that its drive toward profitability is owed thanks to favorable parts availability.

Moreover, Dell said customers can expect to see cuts in computer costs
because parts costs have seen a reduction, which would ultimately stimulate
growth for the company.

Dell said it will announce earnings Nov. 9.

Other notable hi-tech companies such as Intel, Apple Computer and Oracle have all reported slow
downs in growth, particularly in Europe.

Still, Gartner Group analyst Martin Reynolds doesn’t think the PC industry
is suffering. Reynolds said the changes in the market valuations don’t make sense. While investors are rushing out to dump stock, he said, others would do well buying.

“We’ve reached a saturation point,” Reynolds said. “And, of course the PC
makers overestimate their growth. They used to grow 40 percent, but now it
is closer to 10 to 15 percent growth because of the increase in
competition.”

Reynolds said that while the PC growth in the U.S. is still strong, growth
in Europe has lagged due to increase in gas and oil prices and other shifts
in the economy.

“The PC market remains fundamentally healthy,” Reynolds said. “The problem
is that the growth is not insane.”