Dell says demand for products is stabilizing

But the company expects gross margins to dip on higher component costs and a competitive pricing environment

Dell said on Monday that demand for its products is "stabilizing" and that it expects to report a sequential increase in revenue for its second fiscal quarter, which ends July 31.

The computer maker also expects a "modest decline" in gross margins, however, due to higher component costs and a competitive pricing environment, Chief Financial Officer Brian Gladden said in a statement. Gross margins provide a measure of how profitable a company is after its costs of doing business.

Demand for Dell's products and services seems to have stabilized from this time last year, the company said, but the demand varies significantly by customer segment and geography.

"We continue to believe that customers are deferring IT purchases, and that we will see demand return to more typical levels at some point," Gladden said in the statement.

Dell's shares on the Nasdaq fell about 4 percent in after-hours trading, to $12.55.

The announcement came ahead of Dell's analyst conference to be held on Tuesday in Austin, Texas.

Dell's revenue has declined sequentially for each of the last three quarters amid the worldwide recession.

Its revenue in the first quarter fell to US$12.3 billion, a 23 percent drop from the same period a year earlier. Net income fell to $290 million from $784 million on lower PC sales and restructuring charges.

Dell remains focused on cutting costs in a "still-challenging operating environment," Gladden said on Monday. Dell has said it wants to reduce its annual costs by around $4 billion by the end of fiscal 2011.

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