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PC market downturn sees Dell struggle

Though Dell's second-quarter earnings results exceeded analysts' estimates, the computer manufacturing company provided a meagre outlook for the third quarter.

Dell announced $14.48 billion (£9.12 billion) in revenue, an 8 per cent drop from the same time last year, but still coming in above the $13.4 billion (£8.44) estimation Topeka Capital Markets made on Monday.

"We're transforming our business, not for a quarter or a fiscal year, but to deliver differentiated customer value for the long term," CEO Michael Dell said in a statement.

Despite positive feedback from Dell's chief financial officer, Brian Gladden, who called the second quarter performance "another proof-point that our long-term strategy is right," the company's PC business is dragging it down, according to Topeka analyst Brian White.

"We believe Dell should consider getting rid of this [PC] business and focus on expanding its enterprise solutions business," White said. The company's non-PC business performed well in the second quarter, coming in slightly ahead of Topeka's expectations, which were lowered Monday in anticipation of Dell missing its original PC sales forecast.

"A key theme of last night's [earnings] call was the challenges in the PC market around the world," White said.

White cited pressure on Dell to increase PC pricing and disappointing trends in growing markets like India and China, and pointed to the third quarter, when the PC business is likely to get worse. Dell's earnings report showed that revenue in North and South America was down 6 per cent, while Asia-Pacific and Japanese revenue dropped 12 per cent.

Gladden said in a statement that growth in Dell's PC business "was challenging," due to a tough and competitive economic environment. Still, the computer maker continued to focus on higher-value solutions in the business, Gladden said.

Predicting continued growth in departments like services and software, Dell forecast a 2 to 5 per cent drop during the third quarter, due to "the uncertain economic environment, competitive dynamics and soft consumer business," the company said.