Dell warns IT slowdown in US will hit Europe

Dell posted a decline in profit for its fiscal second quarter even as its revenue grew, while economic doldrums held down its results in some parts of the world.

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Dell posted a decline in profit for its fiscal second quarter even as its revenue grew, while economic doldrums held down its results in some parts of the world.

The company said it expected to see the "continued conservatism" in IT spending in the US and that it would spread to Europe and Asia.

The company's revenue grew 11 percent in the quarter which ended on August 1, led by a 28 percent gain in the global consumer business and growth in laptop PCs, which brought in 26 percent more revenue than a year earlier. However, revenue in both those categories was down slightly from the second quarter.

Dell reported net income of $616m, down 17 percent from $746m a year earlier.

The huge PC and server maker saw continued economic weakness, particularly in Western Europe and the US, said Brian Gladden, senior vice president and chief financial officer.

Dell used aggressive pricing to gain a stronger foothold in Europe, eating into its margins, Gladden said. But the company continues to reduce its costs and expects to complete its workforce cutbacks in the current quarter, he said.

Revenue rose to $16.4 billion from $14.8 billion a year earlier. In addition to the large gain in mobility revenue, the services business saw growth of 14 percent and storage revenue was up 11 percent.

Revenue from servers and networking gear increased just 5 percent, but Dell said that was nearly twice the growth rate for that industry segment. Only the desktop PC business had lower revenue, with a dip of 5 percent from a year earlier.

Unit sales grew much more -- 44 percent for laptops and 19 percent for servers -- but average selling prices were down significantly from a year earlier.

Dell said it outperformed its major competitors in all regions and gained market share in all major product categories. The company also said it regained its lead position in flat-panel displays.

Customer interest in cloud computing, which uses a scalable, distributed infrastructure to deliver IT capabilities as services, is helping to drive broad-based increases in demand from enterprises, executives said.

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