Dell Inc. (Nasdaq: DELL) forecast third-quarter revenue that missed analysts’ estimates as its personal computer business dwindles amid a slow global economic recovery and an influx of tablet computers that’s eaten into sales.
Revenue in the fiscal third quarter ending in October will decline 2 percent to 5 percent from the prior three-month period, the Round Rock, Texas company said in a statement. That is the equivalent of $13.8 billion to $14.2 billion in sales, less than the $14.9 billion average analyst estimate, according to data compiled by Bloomberg.
Chief Executive Officer Michael Dell’s strategy of using acquisitions to add software, storage and networking equipment has been slow to offset declining sales of desktops and laptops, which account for more than half of revenue. Consumers and businesses increasingly favor tablet computers such as Apple Inc.’s iPad over traditional machines.
“In PCs, price pressure continues, and the iPad isn’t helping,” said Shaw Wu, an analyst at Sterne Agee & Leach in San Francisco, who recommends owning shares. “An entry-level iPad is $399, and on many sites you can find it as low as $360. For a lot of people that’s a viable alternative to the PC.”
Dell fell in extended trading after closing down 1.8 percent to $12.34 in New York. The shares have lost 16 percent this year.
Second-quarter net income fell to $732 million, or 42 cents a share, from $890 million, or 48 cents, a year earlier. Earnings excluding some items were 50 cents a share, compared with an average analyst estimate of 45 cents.
Sales in the second quarter, ended in July, declined 7.5 percent to $14.5 billion, missing analysts’ $14.6 billion average estimate.
Dell and other PC suppliers are counting on the release of Microsoft Corp.’s Windows 8 operating system in October to lift sales. The software, designed to run well on tablets as well as traditional PCs, may give PC makers a counterweight to Apple’s iPad in the touch-screen device market.
Dell is one of four PC makers Microsoft said would offer tablets using Windows RT, a version of the software tailored for chips from ARM Holdings Plc. Gaining a presence in tablets is important for Dell, which has said desktop and laptop sales will be little changed over the next three years.
Global PC sales stalled in the second quarter, a seventh straight period of anemic growth, market researcher Gartner Inc. said last month.
Last month, Dell agreed to acquire Quest Software Inc., a maker of programs to manage corporate computer systems, for about $2.4 billion. In May, Dell bought closely held Wyse Technology Inc. for an undisclosed sum to gain desktop devices used by cloud-computing customers.