Dell has confirmed that global demand for its products has declined significantly this quarter, an acknowledgement that sent its shares tumbling roughly 10 per cent.
Dell previously said during its recent second quarter earnings announcement that "continued conservatism" in US IT spending had reached into Western Europe and several countries in Asia. While acknowledging the slowdown, Dell said it will grow faster than the industry as a whole this year.
"We saw a very weak August, and on a relative basis, weaker than usual," Dell CFO Brian Gladden said at a Bank of America event Tuesday.
The small business and state and local government markets in the US showed particular weakness, while "corporates have been relatively balanced for us and the consumer market relatively strong," Gladden said.
Gladden declined to provide any new details regarding Dell's plan, announced earlier this year, to reduce annual costs by $3 billion by the end of its fiscal 2011.
While seeing an overall slowdown in business, Dell is not losing market share in a given region, according to Gladden. In the current economic climate, it's no surprise hardware vendors are seeing business weaken, according to one observer.
"The hardware side is the first thing to get hit whenever there's a slowdown," said Forrester Research analyst Andrew Bartels. "The first thing CIOs do is defer purchases of servers and PCs."
The current crisis in the banking sector, and, more broadly, in financial services will have some effect on vendors as financial institutions rein in spending, Bartels said. But more importantly for IT, the banking sector woes could exacerbate problems related to consumer spending and the general economy as for example, a tightening of credit makes it harder to borrow money, he said.
Forrester also released revised 2008-2009 US IT spending projections on Tuesday. Growth in 2008 will be 5.4 per cent, compared to the original 3.4 per cent projected, while 2009 will see 6.1 per cent growth, a sharp drop from the 9.4 per cent rise previously estimated.
The changed forecast means that while spending this year will be stronger than expected, it will take longer for a recovery, Forrester said.
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