Profit, revenue fall

By Reuters  |  Print this article Print

Personal computer maker Dell's profit numbers beat Wall Street estimates but revenues were down for Dell's third quarter. Executives acknowledged that Dell, which competes against HP, Lenovo, Acer and other personal computer makers, continues to see a challenging environment ahead.

Net profit in the fiscal third quarter ended October 31 fell 5 percent to $727 million, or 37 cents a share, from $766 million, or 34 cents a share, in the year-ago period. Per share earnings rose as Dell bought back shares.

The average analyst estimate was 31 cents a share, according to Reuters Estimates.

Revenue in the period fell 3 percent to $15.16 billion, below the average analyst estimate of $16.3 billion, according to Reuters Estimates. Unit shipments rose 3 percent.

The company said it saw strength in Asia and emerging markets, while Western Europe and the United States continued to be slow. Commercial revenue in the Americas fell 8 percent, and 5 percent in Europe.

The company acknowledged that it faced a "challenging" demand environment. Many analysts see Dell as vulnerable to the global economic slowdown due to the company's sizable exposure to a weakening PC market. Its share of global personal computer shipments slipped below 14 percent in the calendar third quarter, according to IDC."

And despite success on the bottom line, the revenue decline worried some.

Gartner managing vice president Charles Smulders called it a "fairly disturbing quarter. On the one hand, they managed to increase earnings per share, but revenue was down."

Shannon Cross of Cross Research said, "It's all cost-reduction, and it seems like they walked away from selling lower-margin products...It's going to be a challenge for companies (like Dell) to cut costs as fast as sales have fallen off."

Dell said it would continue to incur costs as it realigns its business and reduces headcount. It has 2,200 fewer employees than the previous quarter, and has instituted a hiring freeze. It has shed 11,600 employees since the second quarter of last year, excluding acquisitions.

Dell has $8.9 billion in cash, and Chief Financial Officer Brian Gladden said it plans to be conservative with its money, although the company would find a way to make an acquisition if it desired.

Dell also said it was continuing to work to transform its consumer business, which accounted for 18 percent of its revenue in the quarter, up from 16 percent last year.

Dell shares are down around 60 percent this year, at levels not seen in a decade.

Dell shares rose to $10.30 in after-hours trade after closing Thursday's session down 5.2 percent at $9.81 on the Nasdaq.

(Reporting by Gabriel Madway, Anupreeta Das; editing by Richard Chang, Leslie Gevirtz)

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