Dell slashes 2012 sales forecast,bodes ill for HP

Tempers sales expectations ahead of HP8217;s results

Shares down more than 7 percent

The No. 2 personal computer maker on Tuesday cut its full-year revenue growth estimate to just 1 to 5 percent,from 5 to 9 percent previously,citing growing uncertainty about whether government and corporate spending on everything from servers to software can hold up in the face of flagging economic growth.

Dell8217;s move did not bode well for rivals such as Hewlett-Packard Co. Shares of HP,a more diversified computing hardware and services vendor than Dell and more reliant on consumers,slid 1.3 percent.

Industry executives warn that corporate and government spending may have begun to wane on fears of a second-half economic growth slowdown,while a high jobless rate pressures consumer income.

HP,the world8217;s No. 1 PC maker,striving for a turnaround after several disappointing quarters,will report quarterly earnings on Thursday.

We are going to see similar trends with HP,said Brian Marshall,analyst with Gleacher amp; Co,noting maybe some weakness on the topline.

He also noted a pause in technology business spending.

The company founded by Michael Dell has consistently beaten Wall Street expectations this year,a result of expanding its footprint in higher-margin businesses such as servers,storage and computer services.

From a market standpoint,clearly there8217;s a different demand dynamic as you think about revenue growth,Dell Chief Financial Officer Brian Gladden said in an interview. It8217;s a bit of an uncertain environment.

Dell slid 7.65 percent to 14.60 after hours,from a close of 15.80 on Nasdaq.

AND THE BAR COMES DOWN AGAIN

Before Tuesday8217;s results,many analysts had already lowered their calendar 2011 projections as global markets tanked and economies headed for choppy waters. Corporations like Dell may be forced to reduce their full-year targets as demand slows.

During an annual analysts8217; day in June,executives pledged to maintain their pace of acquisitions 8212; it completed its 960 million purchase of Compellent in February 8212; to gain access to corporate clients,and to safeguard margins.

But Wall Street on Tuesday focused on anemic revenue growth,ignoring a 22.5 percent gross margin in the second quarter that actually exceeded analysts8217; projections by more than a full point.

Dell,which in May forecast strong government spending and a good back-to-school season,recorded sales of just under 15.7 billion in its fiscal second quarter ended July.

That marginally missed the 15.76 billion average forecast of Wall Street analysts polled.

It added that sales this quarter would likely stay flat from last quarter.

Dell posted net income of about 890 million,or 48 cents a share,in the quarter ended July,versus 545 million,or 28 cents a share,a year earlier. Excluding certain items,it earned 54 cents a share.

Analysts had expected 49 cents,but it was not immediately clear if that estimate was comparable.