Dell Inc. posted on Thursday lower-than-expected sales for its first quarter which ended on May 1, saying it was severely hurt by its reliance on business customers.

Earnings for the first quarter were $12.3 billion, 23.51% down compared to $16.08 of Q1 2008; or $0.15 per share, 55.9% down compared to $ 0.34 EPS a year earlier. Analysts polled by Thompson Reuters forecast it to be $12.68 billion, or $0.23 EPS.

“Dell has been hurt by its reliance on business customers, which have cut back on purchases even more than consumers.” said Shaw Wu, an analyst with Kaufman Brothers.

According to Dell’s report, its large enterprise revenue declined to $3.4 billion, 31% down from a year ago as many large IT customers defer spending, and sales to small and medium business customers, $3.0 billion, also slumped by 30%. Meanwhile, its consumer revenue was down 16% to $2.8 billion in the first quarter, with break-even operating income.

The world's No. 2 PC maker announced earlier in January that it plans to cut annual expenses by $4 billion within three years, up from its previous plans to reduce expenses by $3 billion within three years.

“We’re continuing to transform the company on the cost side and delivering strong cash flow,” said Michael Dell, chairman and chief executive officer. “Re-establishing cost leadership and having flexibility to invest in our business will position us well as IT spending improves.”

[W]e are picking up that Dell is taking a more active approach in walking away from aggressive pricing and managing its expenses better. Shaw Wu wrote in a note to investors.

Thompson Reuters estimates put Q2 sales, which end in July, at $12.78 billion and EPS at $0.24, only slightly better than this current quarter.