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Dell Warns Of Slowdown In Q3 Sales

ROUND ROCK, TEXAS — Growth in sales to small-business customers worldwide has come up short of Dell Computer’s internal expectations.

This slowdown, as well as weak demand for Dell products in Europe through the first two months of the current quarter, has forced the company to warn that third-quarter sales would fall short of company expectations. It is expected that Dell will hit a bit over $8 billion in third-quarter revenue, some 3 percent below estimates.

If the softness persists into the fourth quarter, in what is already a slowing personal computer industry generally, Dell said full-year revenues could be $32 billion, a jump of $7 billion, or 27 percent, compared to sales in fiscal 2000. Growth at the company has continued to slow over the past few years. Sales rose 38 percent last year and 48 percent in 1998.

Other companies have sounded the warning. Intel said sales would grow 3-5 percent, instead of 9-12 percent. Apple shares plunged 50 percent when it announced slow September sales. And Micron Electronics said its PC business grew by only 5 percent in the quarter, below what analysts had expected.

Dell, however, told analysts at its fall meeting here, that the company remains very optimistic about its profitability outlook for the third quarter of the current fiscal year, and that it believes revenues will continue to expand at a multiple of the industry rate.

Dell said it remains on track to meet profit expectations for the third quarter, although fourth-quarter per share earnings could be one or two cents below company targets.

Dell’s optimism about third-quarter profitability is driven, in part, by favorable component availability, and the fact that profit margins remain firm and have benefited from lower-than-expected component costs.

The computer giant said plans to reduce prices across its product lines have been bolstered by an unanticipated decline in component costs, and that those pricing actions will likely have a greater effect in stimulating demand and revenue growth in the fourth quarter.

Demand in other parts of Dell’s business, which includes home-PC customers, is very strong, according to the company. Among the industry “drivers” expected to keep Dell healthy is an ongoing customer transition to mobile computing products.