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Dell Forecasts Lower Revenue Spooking Investors

Dell Forecasts Lower Revenue Spooking Investors
Dell Technologies Inc.'s shares fell 8 per cent in extended trading on Thursday as it echoed the same sentiments as rivals when it forecast a slowdown because of expected lower spending by consumers and businesses due to consistent high rates of inflation and the gloomier economic outlook.
Following a boom period of two years since the Covid-19 pandemic hit the world, major players in the tech industry, including Intel Corp. and Lenovo Group, have issued warnings of a slowdown in the personal computer industry. 
Research firm Gartner predicts shipments will fall 9.5 per cent in 2022.
Although the slowdown in PC sales has been partially offset by Dell's enterprise-focused business, company executives expressed caution about the outlook for the division that accounts for close to half of its revenue.
"There's caution around future hiring, trade-offs within their IT budgets given the macroeconomic uncertainty, customers reducing the size of orders and buying for only immediate requirements," co-Chief Operating Officer Chuck Whitten said on a post-earnings call.
The firm projected its revenues for the third quarter of between $23.8 billion and $25 billion, which is less than the $26.34 billion analysts predicted.
The company also suffered from a rise in the dollar and COVID-19 flare-ups in China, its second-largest market, making the second quarter's revenue growth the slowest in more than one and a half years.
As the Federal Reserve raises interest rates, the stronger dollar will likely continue to be a pain in the earnings of technology companies like Microsoft Inc. and Apple Inc.
Consumer revenue fell by 9 per cent, but this was partially offset by a 15% increase in the commercial sector, which benefited from companies placing orders to prepare for the hybrid-work era.
The growth in the infrastructure solutions group, which houses the storage business division of the company, was 12 per cent with revenues at $9.5 billion. An adjusted profit of $1.68 per share on revenue of $26.43 billion, a 9 per cent growth,was reported by Dell.

Christopher J. Mitchell

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