Dell warns of hard drive peril

Maker of grey boxes Michael Dell has warned that its revenue could be hit by an industry wide shortage of hard drives.

Dell’s quarterly revenue just missed Wall Street estimates, and the world’s number three boxmaker thinks things could be getting much worse.

It warned that uncertainties surrounding the economy and the hard drive shortage means that Dell’s fiscal 2012 revenue is only growing by a couple of percent.

Dell investors already expected to see the outfit predict a slowdown in PC manufacturing through 2012 after flooding in Thailand.

Chief Financial Officer Brian Gladden told Reuters that higher hard drive costs may force the company to jack up its prices.

It also means that Dell will have to give drives to higher-value customers and products, rather than to the cheap and cheerful market and the great unwashed.

Chief Executive Michael Dell said it was time for the company to move away from low-margin business. He said that concentrating on low value opportunities had put short-term pressure on revenue growth but been a driver for its expanded margins and growing earnings.

Dell must be gutted that it did not managed to benefit from the misery of the maker of expensive printer ink, HP. It seems that HP could take time out to think about spinning off its PC business and its customers still did not defect to Dell.

Dell lost market share during the third quarter to Lenovo which vaulted past it to claim the become a number two, behind market leader HP.

Dell’s public business generated revenue of $4.2 billion, which was down two percent from 2010’s third quarter. Gladden said that this was due to weakness in the United States and Western Europe.

Desktop PC revenue slid six percent to $3.4 billion as Dell’s sales to consumers also fell six percent over the same period.

Revenue in Dell’s fiscal third quarter was essentially flat at $15.36 billion, but slightly lower than the average analyst estimate of what it should have been.

Net earnings rose to $893 million from $822 million, a year-ago.

The only thing that would have given Dell a reason to smile was that his large enterprise business increased sales eight percent in the quarter.

Corporations are upgrading aging hardware which is another reason why Dell does not want to give his limited hard drive supply to the cheap and cheerful market.