Falling PC sales hamper Dell’s efforts to diversify into more profitable products

Dell Inc forecast fiscal fourth-quarter sales that missed analysts’ estimates as falling personal computer sales hamper the company’s efforts to diversify into more profitable products for data centres.

Sales in the current period will rise 2%-5% from the prior quarter, the Round Rock, Texas-based company said in a statement, indicating revenue of $14bn to $14.4bn. That’s less than the $14.5bn average estimate of analysts, according to data compiled by Bloomberg.

Dell, the No 3 PC maker, is struggling amid a deep slump in demand as companies wait to upgrade machines and consumers turn to smartphones and tablets like Apple’s iPad and iPhone. Even as chief executive Michael Dell works to mitigate the decline by adding storage, networking gear, software and services through acquisitions, the company still gets half its sales from PCs.

“Apple’s iPad will continue to have the majority of mind share” among computer users, said Eric Maronak, chief investment officer at Victory Capital Management in New York, which owns Apple, Dell and Hewlett-Packard shares.

PC shipments tumbled 8.3% in the calendar third quarter from a year earlier, according to market researcher Gartner, and are projected to decline this year for the first time since 2001, according to IHS iSuppli. Dell has spent $12.7bn on 17 acquisitions since 2009, adding products for corporate data centres to lessen its reliance on PCs.

Sales in Dell’s fiscal third quarter, which ended Nov 2, fell 11% to $13.7bn, less than analysts’ average estimate of $13.9bn. Profit before some items fell to 39 cents a share, compared with analysts’ average40 cent estimate.

Dell shares declined less than 1% to $9.56 at the close in New York. The stock has dropped 35% this year, compared with a 7.2% gain in the Standard & Poor’s 500 Information Technology Index.

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