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Dell quarterly net income drops by 17%

by Scott Bicheno on 29 August 2008, 10:18

Tags: Dell (NASDAQ:DELL)

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Below expectations

Dell chalked up $16.4 billion in revenue last quarter - an 11 percent year-on-year increase - but that still wasn't enough for it to arrest a decline in net income from $746 million to $616 million - down 17 percent year-on-year. This fell short of general expectations.

Gross margins for the quarter seem to have been adversely affected by "actions to drive growth", which probably means price cutting, in the EMEA region. This is a further indication that EMEA is the most price sensitive region in the world.

"We are positioning Dell to win in a new era of global IT spending," said main man Michael Dell. "We have our most competitive product portfolio ever - whether for digital nomads or hyper-scaled data centers. Our growth at a multiple of the industry across all major product categories for the second consecutive quarter affirms we are on track with our five key business priorities - notebooks, consumer, enterprise, SMB and emerging countries."

Those business priorities look pretty comprehensive and it's not clear what is left from that list to be categorised as low priority. Nonetheless, there's clearly some restructuring going on at Dell as is proudly announced: "Dell's productivity improvements gained momentum in the quarter with operating expenses at 12.2 percent of revenue, a decrease of 1.6 percentage points and the lowest level for Dell in six quarters."

"We are making progress in improving productivity and reducing costs," said Brian Gladden, Dell's CFO. "Strategic actions to accelerate growth in certain areas of our business affected gross margins this quarter and there will be some non-linearity in the improvements in our operating income margins as we rebalance our portfolio, make cost improvements and drive growth."

Still, it might want to get a move on, as its biggest competitor - Hewlett Packard - announced a quarterly increase in profit of 14 percent recently and Dell also has Acer snapping at its heels after the acquisitions of Gateway and Packard Bell.


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