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Dell posts 18 percent profit fall but poaches ex-HP exec


Marius Haas, a former head of HP's networking division, will run Dell's enterprise business

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Dell posted an 18-percent fall in second quarter profits and a drop in revenue of 8 percent to $14.48 billion (£9.17 billion), the technology company reported on Tuesday.

Profits for the three months ended 3 August reached $732 million.

Its server and networking sales were among the highlights for the quarter, up 14 percent from last year, while sales of storage products were down 13 percent. Together, the three product categories account for about one-fifth of Dell's overall business.

Most of Dell's money still comes from desktop PCs, sales of which were down 9 percent from last year, and from laptops and other mobility products, which were down 19 percent. Revenue from services was up 3 percent, Dell said.

Its forecast for the rest of the year was not good. Citing the uncertain economy, weak consumer sales and "competitive dynamics," Dell said its third-quarter revenue would be down 2 percent to 5 percent from the quarter just ended. It also reduced its full-year profit forecast to $1.70 per share, well below the consensus analyst estimate of $1.91 per share.

On the same day Dell announced it had recruited a former Hewlett-Packard executive to run its server, networking and storage division, an important area for the company as it tries to expand its data centre business and reduce its dependence on PCs.

Marius Haas was head of HP's networking business before leaving two years ago to join an investment business. On Tuesday he was named president of Dell's enterprise solutions business, where he'll oversee the engineering, development and marketing of Dell's enterprise products.

Haas replaces Brad Anderson, who ran Dell's enterprise division since 2005 and is now leaving the company.

A new OS release can sometimes boost sales for PC makers, but Dell doesn't expect much benefit from Windows 8, at least in the near term. Dell sells most of its PCs to businesses, rather than consumers, and a lot of businesses are still completing their migration to Windows 7, CTO Brian Gladden said on a conference call.

The company may see "a bit of benefit" from Windows 8 going into next year, the company said.

Dell is in the midst of a turnaround effort to make more money from higher-margin products such as software and services, and those products are often sold hand in hand with data centre equipment, making Dell's enterprise products business important.

As part of the effort, Dell has been buying up software companies such as SonicWall, AppAssure, Scalent and, most recently, Quest Software, which at £1.5 billion will be one of its biggest acquisitions to date. It hopes to package those products with its enterprise hardware to expand its sales.

Revenue for the quarter just ended was below what financial analysts had been expecting, according to a consensus estimate from Thomson Financial. Its earnings before one-time items beat the forecast, however, coming in at $0.50, compared with the analyst forecast of $0.45.

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