Hong Kong: - Dell Inc, the world’s No. 3 PC seller, expects to log solid double-digit growth in China this year, following a near doubling of sales in its latest quarter fueled by government stimulus measures.
Dell saw its sales in China, now its second largest market worldwide, jump 81% in its latest quarter, fueled by a raft of government incentives aimed at stimulating consumption, especially in smaller cities.
The jump marked a sharp increase from the previous quarter, when Dell saw its China revenue grow by about 20%.
Steve Felice, Dell’s president of small and medium business, called the latest growth rate a lofty one to maintain for all 2010, but said the company is still targeting strong gains this year. China now generates about $4 billion in annual sales, about 7-8% of Dell’s total.
“We do think we will grow high double-digit growth rates in China,” Felice told reporters on a conference call on Friday to discuss Dell’s latest performance in Asia.
Dell and rivals including Hewlett-Packard, Lenovo and Acer have all benefitted from China’s 4 trillion ($585 million) economic stimulus spending plan.
The stimlulus contained a specific rebate program designed to boost spending on big-ticket items such as appliances and PCs in smaller cities.
Felice said Dell was particularly well positioned to capitalise on the programs due to its recent push to expand its distribution network beyond the largest Chinese cities.
“We’ve been moving to outer tier cities, improving our distribution network. Our coverage is improving dramatically.”
Felice made his comments after Dell’s quarterly gross margin missed Wall Street expectations, hurt by sales of lower-priced personal computers for consumers and a rise in costs for memory chips and other components.
Dell’s rosy report on China came weeks after Lenovo, China’s dominant PC seller with about a third of the market, also reported its shipments in the country jumped 41% in the quarter through December.
Asia now accounts for around 17% of Dell’s global sales, with the region logging growth in excess of 30% in the company’s latest quarter.
In other major markets, Dell saw its India sales jump some 52%, with the country generating sales worth about $1 billion annually. Japan was a relative laggard, with low single-digits growth.
“Every country in the region grew, which is a very good sign of the health of the economy in Asia,” Felice said.
Dell’s disappointing margin, which reflects the company’s dependence on the computer hardware market, sent its shares down 5% in extended trading on Thursday and overshadowed its stronger-than-expected profit and revenue for the quarter.
Felice attributed the margin pressure partly to strong sales in the year-end quarter to consumers, typically a more price sensitive and lower-margin business. But he said the company expects margins to improve in line with more typical buying patterns heading into 2010.
“We expect margins to return back to that normal range we’ve been talking about, around that 18% range,” he said. “We don’t expect further contraction.”