PC maker says sales to consumers are likely to remain soft through the second half, despite launch of Microsoft's new operating system.
Windows 8: Key Features
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Dell said it expects the consumer PC market to remain soft for the rest of the year, an indication that the company, one of Microsoft's closest partners, isn't expecting the arrival of Windows 8 later this year to boost slumping PC makers' fortunes.
Dell said Tuesday that overall revenue for its fiscal second quarter, ended August 3, fell 8% year over year to $14.5 billion. The company's commercial business was solid, as its Enterprise Solutions and Services Group saw quarterly sales increase 6% to $4.9 billion.
But it wasn't enough to make up for the decline in PC sales, which account for the bulk of Round Rock's revenues. Consumer sales plunged 22% to $2.6 billion. "Growth in our PC business was challenging, as we saw a tough macroeconomic and competitive environment," said Dell CFO Brian Gladden, in a statement.
What may be more concerning for Microsoft and its other hardware partners is that Dell does not see the situation improving in the second half, despite the fact that it's set to introduce new Windows 8-based PCs and tablets on Oct. 26--launch day for Microsoft's new, radically redesigned OS.
The company said it expects third-quarter revenue to be down by 2% to 5%, compared to the second quarter, as a result of "the uncertain economic environment, competitive dynamics, and soft consumer business."
As one of a handful of hardware makers that plan to build both tablets that run Windows RT on ARM chips and Intel-based PCs and laptops powered by Windows 8 Professional and other versions of the OS, Dell is all-in on Windows 8.
But executives at the company said they are cautious when it comes to Windows 8's impact on the market. Customers are taking "a wait-and-see approach" to Windows 8, Gladden said Tuesday on a conference call with analysts.
Some analysts are so skeptical about Windows 8's potential to reinvigorate the Windows PC market, which has lost ground in recent quarters to tablets and smartphones powered by Apple's iOS and Google Android, that they suggested Dell ditch its PC business altogether.
"Given the continued challenges in the PC business, we believe Dell should consider getting rid of this business and focus on expanding its enterprise solutions business," Topeka Capital analyst Brian White said, in a research note to clients.
Dell isn't the only big PC maker taking a hit from PC market weakness. Hewlett-Packard on Wednesday reported that quarterly sales of personal computers were off 10%. "Tablets are taking away from that business," David Pearl, co-chief investment officer with Epoch Investment Partners, told CNBC.
With its own tablets scheduled to hit the market in the fall, Microsoft is clearly hoping Windows 8 will bring a reversal of fortune. Its partners aren't so sure.
At this year's InformationWeek 500 Conference, C-level execs will gather to discuss how they're rewriting the old IT rulebook and accelerating business execution. At the St. Regis Monarch Beach, Dana Point, Calif., Sept. 9-11.
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