Dell slashes 2020 forecast over chip shortage fears

Dip in revenue expected despite device sales rising in the previous quarter

Dell has slashed its full-year revenue forecast for 2020 as it blames a continued shortage of Intel chips for a potential decline in PC shipments, despite its device sales rising during the last quarter.

Dell's PC business had a strong quarter, with revenues rising to $11.41 billion, a growth of 4.6%, but the revenue of its server and networking unit fell sharply by 16% to $4.24 billion. Its 2020 revenue forecast has, in light of these results, fallen from between $92.7 – $94.2 billion to between $91.5 billion – $92.2 billion.

The expected shortage of Intel chips through 2019 and into 2020, as well as the company's overall financial performance, are factors that are contributing to this cut in the revenue forecast, the company has confirmed.

"Intel CPU shortages have worsened quarter-over-quarter, impacting our commercial PC and premium consumer PC Q4 forecasted shipments," Dell's COO Jeffrey Clarke said on a call with analysts.

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Intel confirmed earlier this month the firm had delayed CPU shipments and had not resolved manufacturing shortfalls to meet high demands. Sustained market growth in 2019, the firm said, has outpaced its efforts to meet this demand, and the company was operating with limited inventory.

"This makes us less able to absorb the impact of any production variability, which we have experienced in the quarter," said Intel's executive VP and general manager for sales, marketing and communications, Michelle Johnston Holthaus, in a letter to customers and partners

"This has resulted in the shipment delays you are experiencing, which we appreciate is creating significant challenges for your business. Because the impact and revised shipment schedules vary, Intel representatives are reaching out with additional information and to answer your questions."

HP, meanwhile, has been buoyed by a strong set of results in which its device shipments beat estimates by rising to $10.43 billion for the quarter, equating to growth of 3.6% during last quarter. This also masked shortcomings in its printer division, which fell by 6% to $4.98 billion. 

Its total revenues slightly exceeded expectations by rising to $15.41 billion, which would strengthen HP's hand in continued discussions between itself and printing rival Xerox, in light of continued takeover saga.

After an initial takeover bid in excess of $30 billion was rejected out-of-hand, Xerox proposed that it would approach shareholders directly if HP's board refused to entertain the notion of a friendly acquisition. 

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