Slowdown at Dell raises fears about British PC sales

Dell Computer, the world's number two PC maker, has become the latest tech market casualty with a warning that second-half sales would not meet expectations due to weak demand in Europe resulting, in part, from the strong dollar.

Dell Computer, the world's number two PC maker, has become the latest tech market casualty with a warning that second-half sales would not meet expectations due to weak demand in Europe resulting, in part, from the strong dollar.

The warning, after the New York markets closed on Wednesday, raises questions about the health of Britain's PC market, which accounts for an estimated 35 per cent of Dell's European sales. This is the third time in 12 months that Dell has lowered sales estimates, and the second it has cited softness in Europe.

Howard Seabrook, an analyst with research firm Gartner Group, said: "For Dell, it's not the European market they're sensitive too, but the UK market. [The warning of slower growth] is a comment on the UK market and that they're not picking up volumes in Germany."

A Dell spokeswoman said: "The [UK] consumer market is growing strongly, small business is the second-fastest growing and the large corporate market is growing less fast."

Nearly two-thirds of Dell sales are to medium and large companies and institutional customers. The remainder are to home and small business users.

Dell shares, already half their March high, slid to a new 12-month low, down $2 ³/16 to $26 in midday Nasdaq trading yesterday. The growth shortfall follows recent warnings from Apple Computer and chip maker Intel.

Jim Schneider, Dell's chief financial officer, said sales in the quarter to the end of October would be 3 per cent below company forecasts. If the softer trend continues, Mr Schneider said, sales for the full fiscal year would rise about 27 per cent to $32bn (£22bn) compared with an earlier target of 30 per cent growth. Quarter profits are expected to hit forecasts of $654m.

Dell stands second in the European PC market after Compaq, with a 10 per cent share. In the second quarter to July, its European sales gained 10 per cent from a year earlier to $1.45bn, accounting for almost one-fifth of quarterly world sales.

Estimates from Dataquest (see table) show that the UK accounts for about 35 per cent of Dell's European sales. However, the country accounts for only about one-fifth of the total European PC market.

"Dell is highly dependent on the UK and they need a better balance in France and Germany if they are going to be better insulated from local country swings up and down," Mr Seabrook said.