Dell: Enterprise PC sales will pick up in Q3

Michael Dell cites new processors, Windows 7 and Office 2010 as catalysts for PC upgrades

Companies have started to replace PCs they'd put off updating during the recession, and that cycle will take off in the third and fourth quarters as enterprises spend on new hardware while trying to reduce support and maintenance costs, Michael Dell said on Thursday.

Client PC purchases took a backseat as enterprises froze IT budgets during the recession, leaving companies with aging hardware and outdated software, the Dell CEO said during the company's analyst conference in Austin, Texas, which was also webcast.

Faster microprocessors and new software, including Microsoft's Windows 7 OS and Office 2010, are catalysts for the upgrade cycle to kick in, Dell said.

Traditionally, the third and fourth quarters are busy for commercial spending on PCs, said Jay Chou, research analyst at IDC. Companies started upgrading PCs in the fourth quarter last year, but in small increments.

PC shipments grew by 24.2 percent in the first quarter of 2010 compared to the year-ago quarter, according to IDC.

Maintenance of older hardware and software is an issue, so upgrades could help companies reduce those costs, Chou said. "The pressure due to increasing cost of maintaining an aging install base ... will help kick the refresh up even more," Chou said.

Organizations have now had close to a year to evaluate Windows 7, which was released to manufacturing last July, Chou said.

Dell has seen a spike in PC upgrades as Windows 7 gains a larger footprint, Michael Dell said. The installed base of Windows 7 in organizations is relatively small, but the stability of the OS has ramped up demand for it.

"It's fair to say that we were surprised at the rate of acceptance of Windows 7 by corporate customers," Dell said. "As customers have installed Windows 7, we've seen they are happy, they haven't called us [for support] as much."

The PC upgrade cycle could last from a few quarters to a few years, Dell said. Depending on the size of the company and deployment plans, upgrade cycles could take two years or more in some cases.

The upgrade cycle could also help the enterprise-minded Dell capture back market share the company lost to consumer-focused PC makers during the recession, IDC's Chou said. Acer overtook Dell as the world's second-largest computer vendor in last year's third quarter, according to IDC.

Companies look not only for PCs but also for storage and support that consumer PC makers might not offer, Chou said.

Dell on Wednesday provided its revenue outlook for fiscal 2011, saying it expects an increase of 14 percent to 19 percent compared to fiscal 2010. Corporate PC sales was one of the reasons cited for the expected increase.

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Agam Shah

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