Dell Eyes 2010 Spending Rebound

Dell(DELL Quote) CEO Michael Dell is expecting a big rebound in IT spending next year, although he warns that businesses and consumers are still nervous about opening up their wallets.

"In 2009 there has been a deferral of spending that we think sets up for a refresh in 2010," he said, during the company's annual analyst meeting Tuesday. "What goes on in the economy, virtualization and new products from Microsoft(MSFT Quote) and Intel(INTC Quote) will play a role there."

Dell explained that users have delayed their IT purchases during the downturn. Average life cycles for desktops, servers and storage are now four years, three and a half years, and three years, respectively, he added.

There have, however, been some hints that demand is improving, albeit modestly, and Dell predicted that customers will refresh their storage and servers first, followed by client devices such as PCs.

Earlier this week Dell offered a financial update, predicting sequentially improved second-quarter sales in line with Wall Street's expectations. The Round Rock, Texas-based firm also forecast a modest decline in gross margins, driven by higher component costs, competitive pricing, and mixed demand across products and business segments.

"Global demand appears to be stabilizing," said Brian Gladden, the Dell CFO. "[But] it's mixed in different regions and product areas."

The finance chief added that large enterprises and SMBs are still very weak, although Dell's consumer and public sector businesses are expected to grow in the second quarter. Similarly, Gladden described Western Europe as Dell's toughest market at the moment, whereas Asia is improving, driven largely by China.