Dell sees earnings tumble 63 percent
Published: 29 May 2009 08:55 BST
Dell on Thursday announced a sharp decline in profits as the global downturn hit computer sales.
The company recorded a net income of $290m for fiscal first quarter ending 1 May, and earnings of 24 cents per share, or 15 cents per share when accounting for writedowns from severance pay and factory closings during the quarter. That is down 63 percent from the $784m and 38 cents per share recorded a year ago.
Revenues were also down 23 percent, to $12.3bn.
Analysts on average had been expecting revenue of $12.66bn, and earnings between 19 cents and 27 cents per share.
"It started out as a slow first [fiscal] quarter. It picked up a bit in the second half of the quarter," chief financial officer Brian Gladden said on a call with reporters on Thursday. But he said it was "still a challenging IT demand environment" and emphasised that Dell is not yet ready to say that the drop in demand has yet reached its lowest point.
Dell has been saying for the last few quarters that since its core customer base corporate IT departments are being battered by the economy, it would try to focus on internal housekeeping tasks such as cutting expenses and operating costs. Gladden said the company's operating expenses had fallen by $101m from the previous quarter and by $312m from a year ago.
VIDEO
Dialogue Box 7.4: The expanding digital universe
How much data will be created and stored in 50 years' time? Rupert and Charles make some extrapolations and come to a startling conclusion
Despite that, Dell is still facing major challenges. Revenues decreased in every major business unit significantly, though a relatively bright spot appeared to be the consumer group. Consumer revenue was down 16 percent to $2.8bn, and consumer shipments rose 12 percent from a year ago.
The company been spending much more on research and development on products in Round Rock, Texas, and produced another netbook plus more notebook models including the high-priced Adamo during the quarter.
The company also continued to expand the number of places its PCs can be bought: there are now 30,000 retail outlets worldwide, which is contributing to the growth in the consumer business.
But retail is clearly not the singular solution. Dell needs to do something to turn the ship around, which might come from outside the company. It has not taken the option of an acquisition to achieve quick growth off the table.
IBM is suing to keep its former M&A chief David Johnson from joining Dell, which has reportedly offered him the position of vice president of strategy. Gladden on Thursday declined to discuss Johnson's hiring, but did say that mergers and acquisitions would "continue to be an important part of how we build the company".
"We've done 13 or 14 acquisitions in last few years. We're not sitting back and watching other companies do consolidation," he said.
Did you find this article useful?
3 out of 3 people found this useful
Digg
Slashdot
Del.ici.ous
Stumble
Reddit
