Dell profit plunges 47 per cent

Agencies Posted: Nov 16, 2012 at 1044 hrs
San Francisco Dell Inc\'s third-quarter profit slid 47 per cent, hurt by lower PC sales, weaker demand from large corporations and the shift to mobile computing.

Dell\'s consumer PC business is struggling as more and more consumers are using smartphones and tablets to do basic computing, and the company\'s corporate customers continue to defer spending due to the uncertain state of the economy.

The No. 3 personal computer maker warned that it sees the challenging global macroeconomic environment continuing in the fourth quarter.

The company, once the world\'s top PC maker and a pioneer in computer supply chain management, is struggling to defend its market share against Asian rivals like Lenovo. It is trying to bolster growth by focusing on products and services to corporations.

The company said it expects revenue to grow as much as 5 percent in the current quarter.

Our outlook for the quarter would be generally consistent with what we typically see in terms of a seasonal pickup, it said.

Dell said revenue in its fiscal third quarter fell 11 percent to $13.7 billion, slightly lower than the average analyst estimate of $13.89 billion .

It posted net income of $475 million or 27 cents a share in the quarter, compared with $893 million or 49 cents a year earlier. Excluding certain items, it earned 39 cents a share, compared to an average forecast for 40 cents.

Chief Financial Officer Brian Gladden said in an interview that corporate customers continue to defer technology spending.

It\'s not clear what\'s going to cause them to increase their spending in the short term, given the uncertainty in the economy, he said.

Dell\'s enterprise solutions revenue rose 3 percent to $4.8 billion, while server and networking revenue climbed 11 percent. In contrast, consumer revenue plummeted 23 percent to $2.5 billion, underscoring the plight of the broader PC market, and sales to large corporation declined 8 percent to $4.2 billion in the quarter.

Dell\'s challenges are frankly the same as before - namely the tough macroeconomic environment and cannibalization from mobile devices using mobile operating systems from Apple and Google, Shaw Wu, analyst with Sterne Agee, said.

The consumer market is improving with the launch of the Windows 8 software from Microsoft, which has been designed with touchscreen devices and Internet-based computing in mind, Gladden said.

But sales of devices featuring the Windows 8 software have yet to ramp up while Microsoft is already in the market with its new Surface tablet computer, which may hurt PC sales.


Apart from the consumer, Dell\'s business customers have held back spending, which could be partly attributed to the looming fiscal cliff, Gladden said.

The fiscal cliff involves $600 billion in automatic tax hikes and spending cuts effective in early 2013 if U.S. lawmakers fail to agree on reducing the budget deficit. The cuts could take a toll on consumer and government spending and cause the economy to stall.

I would tell you that the behavior we are seeing from our customers today is actually driven by that uncertainty, Gladden said. It\'s not like it\'s all going to happen overnight. It\'s affecting our business today. Dell is ensuring that it has access to cash in case there is no congressional action.

I would say there are several things we are doing from a planning standpoint, especially on the treasury side to ensure that we are in a position to have appropriate access to liquidity, Gladden said, adding that Dell is making sure it has access to lines of credit and commercial paper.

Dell shares fell 2.3 percent to $9.36 in after-market trade from its close of $9.56. The shares initially rose following the release of the results.

Dell reports 47 pc decline in profit in Aug-Oct quarter

New Delhi,(PTI): Computer maker Dell today reported 47 per cent drop in net profit to USD 475 million for the August-October quarter of this fiscal, mainly on lower PC sales and weak demand from large enterprises.

The company had posted a net profit of USD 893 million in the corresponding period last year.

Dell follows February-January fiscal year, which ends on the last Friday of the month.

The company's revenues also dropped by 11 per cent to USD 13.72 billion in the third quarter of FY13 from USD 15.36 billion in the year-ago period, Dell said in a statement.

Its revenues were down by 5.24 per cent sequentially as the same stood at USD 14.48 billion in second quarter of FY13.

Dell had guided third-quarter revenues to be down 2-5 per cent from second-quarter levels on account of uncertain economic environment, competitive dynamics and soft Consumer business.

For the fourth quarter, Dell expects a sequential revenue growth of 2-5 per cent.

"Dell sees the challenging global macro-economic environment continuing in the fourth quarter, which will continue to impact the company's results. The company expects sequential revenue growth of 2 to 5 per cent," it said.

For the full year, Dell maintains its expectation for at least USD 1.70 in earnings per share on a non-GAAP (Generally Accepted Accounting Principles) basis, it added. Once the world's top PC maker, Dell is now struggling to defend its market share against rivals like Acer and Lenovo and tablets like Apple's iPad.

Revenue in the US was down nine per cent, while that from Europe, the Middle East and Africa was down 15 per cent.

Revenues from the Asia-Pacific and Japan (APJ) region, which includes India, were down 11 per cent year-on-year, Dell President, APJ, Amit Midha told reporters on a conference call.

He, however, did not comment on country-specific numbers.

Dell's revenues in Enterprise Solutions and Services business grew three per cent year-on-year to USD 4.8 billion in the August-October 2012 quarter.

"We are consistently executing our end-to-end solutions strategy for the benefit of our customers. In the quarter, we completed the acquisition of Quest Software which along with other recent acquisitions like SonicWALL and Wyse adds leading management, security, virtualisation and cloud capabilities to our expanding portfolio of powerful solutions," Dell Chairman and CEO Michael Dell said.

The company's server and networking revenues grew 11 per cent. Revenues from Large Enterprise business was USD 4.2 billion in the quarter, a eight per cent decline, while public revenues saw a 11 per cent fall to USD 3.8 billion, the company statement said.

Small and medium business revenue was USD 3.3 billion, a one per cent decline, while consumer revenue was USD 2.5 billion, a 23 per cent decline, it said.

Cash flow from operations in the reported quarter was USD 1.3 billion and Dell ended the quarter with USD 14.2 billion in cash and investments, the company statement said.

"In a difficult global IT spending environment, we saw solid proof points that demonstrate progress in our strategy," Dell CFO Brian Gladden said.

Dell is also encouraged by early interest in its new Windows 8 touch portfolio and the opportunities it creates for the commercial and consumer businesses, he added.