Dell loses US$700 million deal with Philips

In a blow for Dell Inc., the company confirmed Monday it has lost a services deal with Dutch electronics giant Koninklijke Philips Electronics NV that was valued at up to US$700 million.

While Dell has worked with Philips for the past 12 months to provide hardware and managed desktop services to employees at Philips, “It was mutually agreed upon by both companies” to cancel the project, Bob Kaufman, a Dell spokesman, said Monday.

The companies said they did not foresee a successful completion of the deal.

Philips continues to be a Dell customer and the company looks forward to working with them in the future, Kaufman added.

Dell had been awarded a five-year contract with Philips in December 2004. The contract had called for Dell to manage desktop computers, printers, office networks and applications and to provide technical assistance for 75,000 employees at Philips.

Like other hardware makers, Dell has been experiencing a slowdown in growth of its core hardware business and is looking to boost revenue through services and also to expand in markets outside of North America.

The company last week exceeded Wall Street revenue expectations when it announced fourth-quarter results. Revenue was $15.2 billion, a 13 percent increase over the year-earlier period. The consensus estimate from analysts polled by Thomson Financial had been for $14.8 billion in revenue.

However, at the same time Dell said it expects sales will only grow 6 percent to 9 percent in the first quarter of fiscal 2006, a forecast below analysts’ estimates of 10 percent growth. The news caused Dell’s stock to slip in after-hours trading and on Friday, when it closed at $30.38 on the Nasdaq Stock Market.

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