The PC market is continuing to suffer massive losses thanks to the iPad’s increasing popularity. Last week it was HP announcing dismal losses, and now Dell has revealed that they have been hit hard as well as revenue from corporate customers fails to make up for declining personal computer sales.
Yesterday, Dell forecasted third-quarter estimates much lower than analysts on Wall Street had predicted and cut its outlook for profit by over 20 percent.
The company’s stock subsequently fell 5.8 percent to $11.63 per share this morning, the biggest decline since May 23. Up through yesterday their stock had lost 16 percent this year.
The increasing adoption of iPads by both businesses and consumers is definitely affecting their bottom line as global PC sales enter their seventh straight period of anemic growth. The tablet is quickly becoming the device of choice over more unwieldy laptop and desktop PCs, causing retailers and commercial resellers to reduce their stock and affecting Dell’s sales.
According to Brian Gladden, Dell’s CFO, this decline can also partly be attributed to their business customers taking a “wait-and-see approach” on the upcoming tablets based on the new Windows 8 operating system, due out in October. Dell is very reliant on business sales – just 18 percent of its revenue was from consumers last quarter – and the long upgrade cycle for PCs running Microsoft operating systems coupled with the stagnant economy have made businesses more wary of upgrading. As the PC market shifts towards Windows-based tablets, retailers and commercial resellers are also reducing their stock.
Dell’s CEO, Michael Dell, says that the company is working hard to transition along with the changing needs of businesses and consumers. “Enterprise demand obviously in the second quarter was solid,” he said on a conference call with analysts yesterday. “Increasingly we’re changing the sale to be a complete data center sale.”
Dell’s strategy of using acquisitions to add software, storage and networking equipment is helping them transition to the future of the enterprise market, but unfortunately their growth has not been enough to offset their declining sales of laptops and desktops. Perhaps the upcoming Windows 8 will help spur their sales, but it seems doubtful that anything can stop the dominance of the iPad.