Dell issues weak forecast, shares slide

Aug 21, 2012, 5:11 PM EDT
REUTERS/Thomas Peter/Files

* Third quarter revenue forecast trails Wall Street

* Distributors to delay PC purchases before latest Windowsrelease-CFO

* Shares fall 3 percent

Aug 21 (Reuters) - Dell Inc warned of a"challenging" second half as customers cut back on computerpurchases in anticipation of the launch of Microsoft Windows 8software late in 2012, sending its shares down 3 percent.

On Tuesday, the No. 2 U.S. PC maker forecast revenue wouldslide 2 percent to 5 percent in the fiscal third quarter fromthe second, translating to a range of $13.8 billion to $14.2billion. That lagged Wall Street's target of $14.85 billion.

"People had already expected them to take down numbers, butI think the level to which they are taking down numbers ispretty severe compared to expectations," said Cross Researchanalyst Shannon Cross.

Dell Chief Financial Officer Brian Gladden said in aninterview that the company has tempered its outlook for thefiscal third quarter partly because it expects distributors tohold off on purchasing new computers from Dell before theOctober release of the latest version of Microsoft Corp's Windows operating system.

Microsoft will launch a highly anticipated version ofWindows designed for tablets that analysts say give PC makerslike Dell, Hewlett-Packard Co and Lenovo Group Ltd a chance to win back market share lost to Apple Inc's iPad.

"The jury is out as to whether they will be able to improvetheir growth rates until they get some Windows 8 tablets out,"Cross said.

The company reported fiscal second-quarter revenue of $14.5billion, below the $14.64 billion analysts had expected onaverage, according to Thomson Reuters I/B/E/S.

The company's stock fell to $11.98 in after-hours trade.They had closed at $12.34 on the Nasdaq.

Dell, founded by Chief Executive Michael Dell, is in themidst of a turnaround, juggling acquisitions with the need tofatten margins by trimming expenses even as global tech spendingappears to be slipping.

Once the world's top PC maker and a mainstay ofbusiness-school case studies, Dell has been losing market shareand now has to contend with Asian PC makers like Acer Inc and Lenovo.

In May, it warned that global tech spending is weakeningfaster than anticipated.

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