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The Globe and Mail

Dell profit falls 47% on weak corporate demand

Dell chairman and CEO Michael Dell

Tibor Kolley/The Globe and Mail

Dell Inc.'s profit fell 47 per cent, hurt by lower PC sales and weaker demand from large corporations, but the No. 3 personal computer maker said it expects revenue to grow as much as 5 per cent in the current quarter.

Dell shares fell 2.3 per cent to $9.36 (U.S.) in after-market trade from its close of $9.56. The shares initially rose following the release of the results.

Dell – once the world's top PC maker and a pioneer in computer supply chain management – is struggling to defend its market share against Asian rivals like Lenovo Group Ltd., and is in the midst of trying to bolster growth by focusing on products and services to corporations.

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The company founded by chief executive officer Michael Dell warned that it "sees the challenging global macro-economic environment continuing in the fourth quarter."

Dell said revenue in its fiscal third quarter fell 11 per cent to $13.7-billion, slightly lower than the average analyst estimate of $13.89-billion according to Thomson Reuters I/B/E/S.

It posted net income of $475-million, or 27 cents a share, in the fiscal third quarter, compared with $893-million, or 49 cents, a year earlier. Excluding certain items, it earned 39 cents a share, compared to an average forecast for 40 cents.

Dell chief financial officer Brian Gladden said in an interview that the company's corporate customers continue to defer spending on technology.

"It's not clear what's going to cause them to increase their spending in the short term, given the uncertainty in the economy," he said.

Dell's enterprise solutions revenue rose 3 per cent to $4.8-billion, while server and networking revenue climbed 11 per cent. In contrast, consumer revenue plummeted 23 per cent to $2.5-billion, underscoring the plight of the broader PC market, and sales to large corporations declined 8 per cent to $4.2-billion in the quarter.

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