"We are becoming more bearish on the outlook for the PC industry in general," Cathers writes in a research note. "Also, we think Microsoft's upcoming Surface Pro tablet is a harbinger of products to come, and Dell will have trouble competing. We now see revenue declining 4.5% this year, versus our prior 3.5% drop forecast. Finally, we expect operating margins to narrow, on lower leverage and pricing pressures. "
Cathers says some of the decline he expects reflects weakness in public sector business, which accounts for almost 27% of total sales in FY 2012. He thinks that IDC's current forecast for 5% growth in PC units in calendar 2012 might be too optimistic, even with the October release of Windows 8.
"We are now of the mind that sales of tablet/laptop hybrids such as Microsoft's upcoming Surface Pro will make further inroads into PCs' market share in the coming quarters," he writes. "We are less sanguine about Dell's prospects in this area. In our view, Dell's competitors have a head start in touch-screen devices."
DELL is down 7 cents, or 0.6%, to $12.12.
