Dell quarterly net profit down 63 per cent
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Dell quarterly net profit down 63 per cent

US personal computer giant Dell posted a 63-per cent decline in quarterly net profit on Thursday and said it will continue to keep a close eye on costs in a "still challenging" environment.

india Updated: May 29, 2009 11:12 IST

US personal computer giant Dell posted a 63-per cent decline in quarterly net profit on Thursday and said it will continue to keep a close eye on costs in a "still challenging" environment.

Dell said net profit fell to 290 million dollars, or 15 cents per share, in the first quarter of its fiscal year from 784 million dollars, or 38 cents per share, in the same quarter a year ago.

Wall Street analysts had forecast earnings of 23 cents per share.

Revenue declined 23 percent during the February-April period to 12.3 billion dollars, the Texas-based company said, slightly lower than the 12.7 billion dollars forecast by analysts.

Dell managed to keep expenses in line with expectations despite costs of recent restructuring.

"We're continuing to transform the company on the cost side and delivering strong cash flow," chairman and chief executive Michael Dell said.

"Re-establishing cost leadership and having flexibility to invest in our business will position us well as IT spending improves. We're preparing for what we believe will be a powerful replacement cycle," he added.

Chief financial officer Brian Gladden said the company had "maintained solid operating margins and made further progress toward reducing annualized costs by four billion dollars by the end of fiscal 2011."

Dell did not provide an outlook for the current quarter but said "indicators of global IT demand remain mixed, and the broader environment is still challenging."

The commercial market for computers has sagged as companies delay replacing aging equipment, according to Michael Dell.

Dell reported that revenue from sales of home or personal computers in its "consumer" category was 2.8 billion, a 16 percent drop from the same quarter last year.

Computer sales to "large enterprise" businesses were reported to be 3.4 billion dollars, a 31 percent plunge from the same period a year earlier.

"I'm hearing they are planning on a pretty big 2010 refresh," Michael Dell said of business customers during a conference call with analysts and journalists.

"They are planning on Windows 7; they have passed over Vista. I think there will be quite a powerful cycle of upgrades very focused on newer technology."

He believes that businesses needing to "refresh" workplace computers will be enticed by machines built with new generation chips from Intel and Microsoft's latest operating system, Windows 7.

"As (work) machines get into their fourth or fifth year and at home they have brand new products with the latest software and capabilities. That can't go on forever," the chief executive said.

"If you get the right combination of new product cycle Intel and Microsoft have interesting products coming you can ignite a powerful refresh cycle and that is what we are planning for."

For now, computer sales and prices are down market wide, according to Dell.

"Our largest global customers have been most conservative with their IT budgets and we expect them to be slower coming back," said Gladden. "We don't believe there is enough momentum to call a bottom yet."

Dell is pleased with its cost cutting progress and is optimistic that IT spending will revive along with the global economy, according to Gladden.

"We are on the attack into the BRIC countries and we are going to grow there," Michael Dell said, referring to Brazil, Russia, India, and China.

"We see a lot of opportunity to grow in all those countries."

Dell last month closed a factory in Ireland and moved it to Poland.

The company's shares were trading slightly higher in after-hours electronic trading in New York, up a percent to 11.60 dollars.

First Published: May 29, 2009 11:11 IST