Dell shares drop on warning over 'PC demand'

 

Shares in Dell dropped to their lowest level in seven years in US trading after the computer manufacturer predicted a “further softening” in demand this quarter.

A technology slump that started in the US last quarter has spread to Western Europe and some Asian countries, Dell said today, reiterating comments made last month.

The company expects to incur costs this quarter from revamping operations and eliminating more than 8,800 jobs.

Dell employs some 2,000 workers at its Limerick manufacturing plant in the Raheen Industrial Estate, a further 1,000 people in financial, marketing and other positions. It also employs 1,300 sales support staff at Cherrywood south Dublin.

Dell, the second largest personal-computer maker, is struggling to keep up with industry leader Hewlett-Packard, which is posting higher earnings than analysts
anticipated and has profit margins 5 percentage points higher than Dell.

Chief executive officer Michael Dell has pledged to cut up to $3 billion in annual costs by eliminating employees and moving to lower-cost manufacturers.

Dell shares fell $1.74, or 9.7 per cent, to $16.25 at 10.13am New York time (3.13pm Irish time) in Nasdaq Stock Market trading.

The price was the lowest since September 2001. The stock had dropped 27 per cent this year before today, compared with a 10 per cent decline for Hewlett-Packard, which announced plans yesterday to cut almost 25,000 jobs as it integrates the purchase of Electronic Data Systems.

Since returning to the helm last year, Michael Dell (43) started selling PCs through retailers and overhauled design practices to compete with Hewlett-Packard, which led in PC shipments for the past two years.

Dell said in April it would shed even more jobs than the 8,800 projected last year.

The reductions Dell referred to in its statement today pertain to that round of cuts, not new ones, spokesman Jess Blackburn said.

Profit dropped 17 per cent and “strategic pricing” hurt profit margins in Europe, the Middle East and Africa.

Agencies