September 17, 2008

Dell and Ingram Warn on Technology Demand

By From news reports

Dell and Ingram Micro, two of the biggest computer vendors, warned Tuesday that demand for information technology was weakening, adding to worries that the crisis on Wall Street would hurt corporate and consumer spending.

Neither company mentioned the financial sector, but they were the first major U.S. technology companies to warn investors since Lehman Brothers collapsed, Merrill Lynch was sold and American International Group said it would need a huge loan to survive.

"When you see these failures on Wall Street and the concerns that people have about banks," said Shannon Cross, an analyst for Cross Research, "I think it does cause people to pull back a little on their spending."

Dell, the second-largest maker of personal computers behind Hewlett-Packard, said in August that customers were holding back on purchases.

"The company is seeing further softening in global end-user demand in the current quarter," Dell said Tuesday. Dell added that it expected to incur costs to cut its work force and invest in infrastructure and acquisitions.

Ingram Micro, the world's biggest computer products distributor, cut its third-quarter profit and revenue outlook, saying economic softness in the summer was continuing into September and pressuring operating margins.

"In Europe, we are not seeing the typical September bounce-back from the summer holidays," Gregory Spierkel, the Ingram Micro chief executive, said in a statement. He added that after a stable summer, North America was weakening in September.

The warnings came a day after HP said it would eliminate 24,600 jobs, or 7.5 percent of its work force, as part of its plan for digesting Electronic Data Systems, the computer services giant that HP acquired for $13.9 billion in August.

The layoffs are the start of a three-year plan in which HP will try to unify its existing services business with EDS. Up to half of the eliminated positions may be refilled over the course of the reorganization, HP said.

Analysts said that Dell's outlook might not have the same impact on HP.

"We think HP is well positioned to outperform given its diverse product line up and ability to leverage the EDS channel for incremental sales," the analyst Cross said.

Originally published by Reuters, IHT.

(c) 2008 International Herald Tribune. Provided by ProQuest LLC. All rights Reserved.