Dell cuts profit outlook by 20 pct

By AGENCIES

DELL Inc. (DELL) declined after the computer maker cut this year’s profit forecast, as revenue from companies fails to counter shrinking personal computer sales.

The company yesterday forecast third-quarter revenue that missed analysts’ estimates and cut its profit outlook by 20 percent, as competition from Apple Inc. (AAPL)’s iPad and an anemic global economic recovery drags down PC demand.

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 half of revenue. Consumers and businesses increasingly favor the iPad and other tablet computers over traditional machines.

“It’s a half-decade journey or more for Dell to transition from where they have been to more enterprise sales,” said Frank Gillett, an analyst at Forrester Research Inc. (FORR) “It’s a long transformation project.”

Since Dell is so reliant on business sales -- just 18 percent of revenue was from consumers last quarter -- it’s subject to long upgrade cycles for PCs running Microsoft Corp. (MSFT)’s operating system, Gillett said. The next version, Windows 8, is due out in October.

“In general companies tend to be slow to do upgrades and they’re being even more conservative this time,” Gillett said.

Dell fell 4.5 percent to the equivalent of $11.79 in German trading after closing at $12.34 yesterday in New York. It had slid as much as 6 percent to $11.60 in extended U.S. trading and has lost 16 percent this year (Bloomberg).