On Tuesday, Dell Inc. forecast its revenue for the third quarter and missed Wall Street estimates. The company also cut its outlook for profit by over 20%, as competition from the iPad from Apple and a very anemic economic recovery across the globe has dragged down demand for PCs.
Michael Dell, the company CEO, has a strategy of using different acquisitions to add software, networking equipment and storage, but that has been slow in offsetting the drop in PC and laptop sales, which represent 50% of the company’s revenue. Businesses and consumers are now favoring the iPad or other tablet options over the traditional laptop or desktop models.
One analyst said it is a five year journey for Dell to be able to transition from where they had been to more enterprise sales. The project, said the analyst is a long transformation.
Because Dell is very reliant on sales from businesses, only 18% of its sales were from consumers during the last quarter, it is subject to the long upgrade cycles for those PCs that are running operating systems from Microsoft. In October, the next version from Microsoft will be Windows 8.
Generally, companies are slower to perform upgrades and during the economic problems globally over the past three years, companies have been even slower. Dell dropped 4.5% in trading on Wednesday to $11.79 per share. In the U.S., the company had dropped by up to 6% in afterhours trading on Tuesday afternoon. Thus far, in 2012, the share value of Dell has fallen by 16%.
Revenue in the quarter that will end during October will fall by 2 to 5% from the previous quarter, said the company in its prepared statement on Tuesday.