Dell Punctures Hopes for PC Health

Updated from 2:23 p.m. EDT

SAN FRANCISCO -- After displaying a surprising immunity to the broader economic slowdown, the PC industry is feeling the pain.

On Tuesday Dell(DELL), the world's second largest PC maker, warned that global demand has worsened since it last spoke to investors -- only two-and-a-half weeks ago.

The comments, which Dell made ahead of an executive's appearance at an investor conference Tuesday, underscore how rapidly the PC business is deteriorating, as slackening demand for PCs in North America has spread to Europe and increasingly into Asia.

Dell shares tumbled 9.4%, or $1.69, to $16.30 in midday trading Tuesday, falling as low as $15.68 at one point -- the stock's lowest level since February 1998, adjusted for splits.

While Dell has grappled with its share of internal problems in recent months as it seeks to improve its operations and revive the company's growth, many investors seem to take Dell's word that an industry-related slowdown, not Dell-specific problems, were behind the latest warning.

"When things really get difficult, technology is, in the end, a discretionary purchase," says Pat Becker Jr., of Becker Capital Management.

Shares of various PC-related tech firms were under pressure Tuesday, with Apple(AAPL) falling $2.42 to $137.94 and Intel(INTC), the world's No.1 maker of PC microprocessors, down 12 cents at $19.24.

Hewlett-Packard(HPQ), the world's largest PC maker, was up $2.79 at $48.12 in the wake of a securities meeting Monday in which it detailed plans to integrate its $13.9 billion merger with EDS and disclosed that it was laying off nearly 25,000 employees to save costs.

The grim sentiment towards PC makers represents a rapid change of fortune in the business, which until recently was considered a safe harbor by investors.