As Lenovo sales fall apart, huge risks for Dell

Lenovo is, by most measures, the third largest PC company in the world. Several years ago, it took over IBM's(NYSE: IBM) personal computer business, giving it a foothold in the U.S.

Last night, Lenovo said its business is falling to pieces. Coming a day after a warning from Intel (NASDAQ: INTC), a grim picture of the industry is beginning to emerge. The most likely company to bear a heavy burden is Dell (NASDAQ: DELL), which is already facing challenges to its sales and global market share.

According to the FT, "Along with other computer makers, Lenovo is suffering from a plunge in demand for PCs. Lenovo, however, is particularly hard hit because of its reliance on the corporate segment, where companies are cutting IT spending aggressively." Dell also relies on the corporate market for a large piece of its sales.

Lenovo also said it would cut 11% of its staff.

Dell's shares are already down to $11 from a 52-week high of $26. If it reports awful earnings and guides down for 2009, that share price would easily drop below its 52-week floor of $8.72. By the way, if Dell had to cut 10% of its workers, over 8,000 people would be out of jobs.

Douglas A. McIntyre is an editor at 24/7 Wall St.