--Dell shares hit lowest point since September 2010 on concerns about spending on tech --Dell's results also dragging down rival Hewlett-Packard, other big tech names --Concerns about economy, sales growth seen lingering By John Kell Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Dell Inc. (DELL) shares plunged 17% Wednesday and hit their lowest point in 20 months after the company's quarterly update raised questions about the strength of computer sales, overall spending on technology and the company's ability to make the business grow. Dell, which in recent years has looked to move beyond its core personal-computer business and broaden its portfolio of products for corporate customers, is facing stiff competition across its business lines. Management conceded Tuesday that spending on desktops and notebooks has remained under pressure, and that some customers were holding back on big purchases. Brian Gladden, the company's chief financial officer, said it is "a challenging competitive environment" and noted "we have to execute better." Analysts agreed. "We still believe Dell needs to take bolder, more aggressive steps to reinvent itself," wrote Sterne Agee analyst Shaw Wu. Overall, Dell's profit in the latest quarter missed Wall Street's expectations and the company issued a downbeat top-line outlook for the current quarter. Dell shares recently fell 17% to $12.47 and are the biggest percentage decliner on the S&P 500. The stock's low Wednesday of $12.43 is its worst point since September 2010. The results are also weighing on shares of Hewlett-Packard Co. (HPQ), which is likely to outline plans to lay off as many as 30,000 workers when it reports earnings Wednesday. H-P shares recently fell 4.6% to $20.78 after earlier setting a seven-year low at $20.57. Wu noted that Dell is in a tough position with PCs as it is sandwiched between low-cost players, such as Lenovo Group Ltd. (0992.HK, LNVGY) and Acer Inc. (2353.TW, ACEIY), and the increasing gains made by Apple Inc. (AAPL). In the latest quarter, Dell's revenue from desktop PCs slipped 0.8%, after rising in the prior quarter. Faced with soft PC sales, Dell has been attempting to boost both its revenue and profit by acquiring higher-margin businesses, including data-storage, security and networking technologies. Those acquisitions include Perot Systems, Force10 Networks and more recently Wyse and SonicWall. But despite efforts to grow beyond the PC business with multiple acquisitions in recent years, Sterne Agee estimates 70% to 75% of its business is still tied to PCs. Dell's large enterprise revenue dropped 3%, driven by weakness in developed markets as some customers delayed their tech purchases. Dell hired sales specialists last year to help bolster the enterprise business, though Chief Commercial Officer Stephen Felice told analysts on Tuesday the company had more to do to improve execution. The company's comments about customers delaying tech purchases, echo similar comments from network-equipment maker Cisco Systems Inc. (CSCO) earlier this month. Cisco's shares slid 1.2% to $16.53 in recent trading, and the stock has dropped 18% in May. Other tech names seemingly affected by Dell's comments on tech spending and a slowdown in computer sales include Microsoft Corp. (MSFT), off 3.2% to $28.81; NetApp Inc. (NTAP), down 3.4% to $32.18; and EMC Corp. (EMC), falling 2.3% to $25.01. For now, concerns about the economy and Dell's sales growth could weigh on Dell's performance for the next few quarters, said Mizuho Securities, which trimmed its stock rating on Dell to neutral and cut the price target to $15 from $20. The bank said it would remain on the sidelines "until we see consistent execution by the company." -By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com
