Sat, Feb 28, 2009 - Page 11 News List

Dell profits fall 48 percent in Q4

AP , ROUND ROCK, TEXAS

Dell Inc said on Thursday that profits dived 48 percent during the fiscal fourth quarter as the recession forced consumers and businesses to spend less on technology. The company also said it expected to make further cuts to its work force.

Earnings for the quarter that ended Jan. 30 sank to US$351 million, or US$0.18 per share, from US$679 million, or US$0.31 per share, a year earlier. Excluding one-time charges, Dell would have earned US$0.29 per share, just above the US$0.26 per share expected by analysts polled by Thomson Reuters.

But sales missed Wall Street’s US$14.2 billion forecast by some distance, dropping 16 percent to US$13.4 billion from US$16 billion in the same prior-year period.

“We can’t predict how long this slowdown will last,” Dell chief financial officer Brian Gladden warned during a conference call with analysts. “We expect it to be protracted.”

Dell has been working to cut annual costs, and on Thursday Gladden said the company was targeting a US$4 billion reduction by the end of fiscal 2011, US$1 billion more than its previous goal.

Dell is struggling with the same problems it has faced over the last several quarters: over-dependence on the sinking PC market and US sales.

“I think it’s kind of more of the same. Which is better than, ‘It’s going to get a whole lot worse,’ but more of the same is not exactly great,” Shaw Wu, a Kaufman Bros analyst, said of the quarter.

Revenue declined across all of Dell’s product divisions.

Corporations based in the Americas, which make up the biggest slice of Dell’s sales, spent 17 percent less than in the prior year. Sales to companies in the rest of the world also dropped by double digits.

Dell, the second-largest computer maker after Hewlett-Packard Co, said it shipped 18 percent more computers for consumers worldwide in the quarter. But the rising popularity of netbooks — smaller, inexpensive laptops — pushed revenue from consumers down 7 percent.

During the conference call, Dell chief executive Michael Dell brushed off the idea that netbooks were hurting regular consumer laptop sales, or that they might appeal to businesspeople and represent a threat to sales to corporations, too.

But Pacific Crest Securities analyst Andy Hargreaves disagreed, and said in an interview that he believed Dell had to slash the prices of its lower-end laptops because netbooks, which can sell for US$400 or less, make it hard to sell a basic laptop for more.

For the full year, Dell said its profit sank 16 percent to US$2.48 billion, or US$1.25 per share, from US$2.95 billion, or US$1.31 per share, last year.

Revenue was flat at US$61.1 billion.

Analysts had forecast a profit of US$1.32 per share on sales of US$61.8 billion.

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