Dell Earnings Plunge 63 Percent In The First Quarter

News — on May 29, 2009 at 12:28 am | Comment Now

The quarter that ended on May1 depicted declining profits for Dell Inc.

Dell Inc. announced on Thursday, that the company recorded a net income of $290 millions for the first quarter of the fiscal year 2010, and earning of 24 cents per share or15 cents per share when accounting for write downs from severance pay and factory closings during the quarter, in comparison to $784 million, and 38 cents per share for the same period the previous year. This portrayed a sharp decline of 63 percent as the recession continued to crimp computer sales around the world. Revenues were also down 23 percent to $12.3 billion.

Analyst Analysts were expecting earnings of 22 cents a share on revenue of $12.6 billion.

In a call conference, Chief Financial Officer Brian Gladden said sales were slow in the first quarter and gradually picked up towards the second quarter, but that is normal for the first time of the year. He stressed that Dell is not yet ready to say that the drop in demand has yet reached its lowest point and conversations with customers yield “mixed signals.”

At Dell, sales of laptops and the smaller, less powerful net books, which together make up Dell’s largest product category, fell 20 percent in the quarter since its core customer base; corporate IT departments are facing the effects of recession at their end.

Dell said it slashed operating expenses by 15 percent from a year ago to $1.8 billion as the PC maker tries to squeeze $4 billion out of its annual costs. Despite cutting down the expenses Dell, is still facing major challenges. However it has seen a bright spot appearing on the consumer group. Consumer revenue was down 16 percent to $2.8 billion, and consumer shipments rose 12 percent from a year ago. The company has been spending on research and development on products down in Round Rock, Texas, and has produced yet another Netbook, and more notebook models including the high-priced Adamo, during the quarter.

In view of their expansion plans, the company has increased the number of retail outlets from where its PC can be purchased. They have around 30,000 retail outlets worldwide which is contributing to the growth in the consumer business.

However, retail is not the solution to turn the ship around. Dell needs to do something from outside the company to make situations better. 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 designation of vice president of strategy. In a call conference on Thursday, Gladden declined to discuss Johnson’s hiring, but said that

“Mergers and acquisitions would continue to be an important part of how we build the company. We have done 13 or 14 acquisitions in last few years. We’re not sitting back and watching other companies do consolidation”.