Dell Computer Corporation, the American PC maker which employs some 5,700 people in Limerick, Bray in Co Wicklow, and Dublin, has become the latest technology company in the US to warn of reduced profits because of the economic slowdown.
But the company appears to have no immediate plans to trim its overseas operations. Chief executive Mr Michael Dell told analysts in a conference call yesterday that the market in Europe in the quarter "appears to be somewhat stronger" and "server share there seems to be accelerating".
A spokesman for Dell said he did not foresee any change in Dell's operation in Ireland or in other locations abroad. "I don't know that there are really any implications for our operation in Ireland," said Mr T R Reid at Dell headquarters in Austin, Texas. He pointed out that the company would add at least two full points to market share for the quarter, from 10 to 12 per cent.
Mr Enda Connolly, IDA director for North America, said in New York yesterday that because of continued growth in Europe, it was comfortable with the assurance that there would be no implications for Dell in Ireland. Almost all technology companies in the US have reported reduced profits due to the slowdown in the economy. Gateway said it was laying off 10 per cent of its global workforce as a costcutting measure and its 1,600-strong Dublin based workforce will be told today how many of them will lose their jobs. Some 72,000 people in Ireland are employed in the technology sector.
Dell announced yesterday before markets opened that fourth-quarter profits would miss their target by as much as 30 per cent as a result of the economic slowdown and the company's strategy of reducing prices to gain market share.
The PC maker's shares opened yesterday on the Nasdaq at $25.60 (€27.32) and by midday had fallen to $24.90, well below the 52-week high of $59.69. By close they had rallied to over $26.
Dell said it expected fourth-quarter earnings to be in the 18-19 US cents range, below its previous guidance of 26 US cents. It blamed economic conditions and lower demand for computer systems and services. The company will report earnings on February 25th. It said revenues were now expected in the range of $8.5-8.6 billion.
The Dell spokesman told The Irish Times that its unit shipments grew as much as four times the industry rate in the quarter, and that it expected to report strong revenue growth and industry-leading profitability. Quarterly unit shipments were likely to increase more than 40 per cent from the year-ago quarter, he said.
Nevertheless, operating results will fall short of company guidance at the start of the quarter because of deterioration in global economic conditions and overall demand for computer systems and services. "This performance clearly distinguishes us from other computer systems companies, given current realities of the global economy and computer systems market," said Mr Dell. "Customer preference for direct relationships continues to grow and we're extending our price leadership, regardless of the economic environment."
Dell's chief financial officer, Mr James Schneider, said the company "felt we needed to be more aggressive and take more share" and that Dell would probably have seen $8 billion in revenue "had we not been more aggressive in pricing".
PC hardware makers' profit margins were squeezed last year as they were forced to cut prices to encourage consumer demand. In the run-up to Christmas in the US, Dell cut prices on its Latitude notebooks by as much as 20 per cent while Gateway cut the price of entry level desktops.
Dell, number two worldwide in market share, employs 39,000 people in the US, Ireland, Brazil, Malaysia and China.
