SAN FRANCISCO – Dell Inc.'s decision to cut its revenue forecast for the year shows how computer makers are getting pulled in two directions at once, stretching some investors' faith to a breaking point.

Corporate and government demand for PCs has been strong for the past year, helping to lift the industry after the Great Recession. But consumer demand has collapsed because of high unemployment and the lure of new gadgets such as tablet computers and smartphones.

Worrisome new economic signs and budget cuts threaten to hamper the recovery. They have cast doubt on the ability of Dell and other PC makers to lift themselves in a meaningful way.

Dell's stock fell more than 7 percent Tuesday even as the company said its net income rose 63 percent in the latest quarter. The company lowered its revenue forecast for the fiscal year ending in January. It blamed "a more uncertain demand environment" than previously envisioned and a corporate decision to focus on more profitable deals.

The downgrade followed a barrage of bad news in recent months about the computer industry's health, and it could be a harbinger of tough times for other computer makers. Hewlett-Packard Co., the world's No. 1 PC maker, reports its results Thursday.

Shaw Wu, a technology analyst with Sterne Agee, said Dell's forecast was surprisingly weak and reflects economic troubles that are leading to lower spending globally on information technology. He added that it "definitely dampens expectations" for HP.

However, Wu added that part of Dell's troubles come as another company — Apple Inc. — is benefiting with a stronger push into small and medium businesses.

Apple, a key player in inventing the PC some 30 years ago, is thriving even as the PC industry suffers because of the company's pioneering of new markets, including tablet computers with the popular iPad. Over the past week, Apple has traded places with Exxon Mobil Corp. as the most valuable company in the world.

Outside of demand for Apple's Mac computers, consumer demand for PCs has cratered, reducing growth and even leading to contraction in the U.S. and Europe. Although consumers make up only 20 percent of Dell's PC business, they remain a powerful force in the digital economy. By snapping up iPads and smartphones, consumers are demonstrating that some hot new technologies — just not PCs — can be strong sellers even in hard economic times.

Meanwhile, government austerity measures have fueled uncertainty. That is threatening to depress not just government spending but consumer spending as well.

The pressures have deepened doubts about the industry's recovery. Dell's revenue from large corporations and consumers each rose 1 percent during the quarter from last year, to $4.6 billion and $2.9 billion, respectively. But revenue from the public sector fell 3 percent to $4.5 billion.

Revenue from small- and medium-sized businesses, where analysts say Dell is losing ground to Apple, grew 5 percent to $3.7 billion. But that growth rate is lower than previous years. In the same quarter last year, revenue grew 25 percent.

Where growth is occurring, it's generally not in Western countries. Dell indicated that India and China were two of its strongest-growing regions in the three months ended July 29, its fiscal second quarter.

After the market closed, Dell said net income rose to $890 million, or 48 cents per share, primarily on the strength of corporate and government spending. Companies have been banking record profits and upgrading older PCs and servers even as hiring remains tepid.

Dell earned 54 cents per share on an adjusted basis, which beat the average estimate of 49 cents per share from analysts polled by FactSet. A year ago, Dell earned $545 million, or 28 cents per share.

But Dell's revenue fell short. Although it rose 1 percent to $15.66 billion, analysts had been expecting $15.75 billion.

The company, which is based in Round Rock, Texas, also said it now expects revenue to grow 1 percent to 5 percent, compared with its previous forecast of 5 percent to 9 percent. The new forecast translates to $62.1 billion to $64.6 billion.

SAN FRANCISCO – Google Inc.'s latest deal aims to help people find the best daily deals on the Web.

In its latest acquisition of talent and technology, Google has bought Dealmap. It's a 15-month-old startup that compiles discount offers from local merchants scattered in markets across the nation.

Financial terms of the acquisition announced Tuesday weren't disclosed. It's the latest in a flurry of acquisitions that Google has made to expand its Internet empire into promising new markets. Since the end of 2009, Google has spent more than $2.7 billion buying more than 70 companies.

In this case, Google is trying to become a bigger player in the rapidly growing specialty of distributing daily bargains from local merchants around the country. Groupon and LivingSocial have emerged as early leaders, but hundreds of competitors are now vying for a share. Google, as the owner of the Internet's most popular search engine and most lucrative ad network, looms as one of the most imposing entrants.

Google is adding Dealmap to its arsenal just a few weeks after starting its own daily deal service. Its version, called Offers, currently confines its bargains to New York, the San Francisco Bay area and Portland, Ore., but Google plans to add more cities. The company developed its service after Groupon turned down a $6 billion takeover offer last year.

"We've been thrilled with the early success of our commerce offerings, and we think (Dealmap) can help us build even better products and services for consumers and merchants," Google spokeswoman Katelin Todhunter-Gerberg said.

Groupon, which is based in Chicago, is now pursuing an initial public offering of stock that's expected to be completed in September or October. Although it's only three years old, Groupon already is on pace to generate more than $2 billion in annual revenue — a threshold Google didn't eclipse until its sixth year in business.

Both Groupon and LivingSocial have been aggressively expanding in an attempt to build on their early lead in the daily deal market. LivingSocial broadened its reach in Asia on Tuesday with its own acquisition of a South Korean deal site called TicketMonster.

Dealmap, which is based in Menlo Park, Calif., has built a database that lists deals from more than 450 different sources. It says it has more than 2 million users.

SAN FRANCISCO – Apple Inc. is in talks to potentially bid for video-streaming service Hulu, according to a person close to the situation.

The person spoke on condition of anonymity because they are not authorized to talk about the matter.

An acquisition of Hulu could bolster Apple's iTunes store, which provides videos users can rent or buy, and help it compete with Netflix Inc. Hulu offers a subscription streaming service. It also brings in revenue from ads that accompany content it streams to users free-of-charge.

Hulu, whose owners include The Walt Disney Co., News Corp. and Comcast Corp., started presenting its financial information to interested bidders late last month, after an unsolicited offer prompted its board to look for other offers.

Apple's interest in Hulu was reported earlier by Bloomberg News.

SAN FRANCISCO – Google's quarterly lobbying expenses surpassed $2 million for the first time during the spring and early summer. Google surpassed the milestone amid U.S. government scrutiny that hatched a wide-ranging investigation into the Internet search leader's business practices.

The company says it spent nearly $2.1 million trying to make its points with lawmakers and regulators during the April-June period. That's a 54 percent increase from $1.34 million at the same time last year.

The latest numbers were in documents filed late Wednesday.

This year's second quarter lobbying bill is by far the largest that Google Inc. has run up since opening its Washington, D.C., office in 2005.

In another first, Google is now spending more on lobbying than Microsoft Corp., a fierce rival and critic that has urged government regulators to rein in Google.

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Wed Jul 20, 2011 4:42pm EDT