Dell's Profit Slides 63% on Falling PC Demand

By Jessica Davis  |  Print this article Print

Dell attributed its 23 percent decline in revenues and 63 percent drop in net income to the tough economic environment and falling PC sales. But Dell says it anticipates a "powerful replacement cycle" coming soon. Dell's results follow rival Hewlett-Packard's earnings announcement.

Falling PC sales meant a 63 percent drop in first-quarter net income for Dell (NASDAQ:DELL), which reported net income today of $290 million in fiscal Q1 2010, down from $784 million from the same period a year ago.

The huge net income drop came on lower revenues for the quarter. Dell reported revenue of $12.3 billion, compared with $16.1 billion during the same period a year ago, representing a 23 percent decline.

"We’re continuing to transform the company on the cost side and delivering strong cash flow," says Michael Dell, chairman and CEO, in a prepared statement issued by the company. "Re-establishing cost leadership and having flexibility to invest in our business will position us well as IT spending improves.

"Signals about the demand environment are mixed, but we’re preparing for what we believe will be a powerful replacement cycle, with virtualization and managed services playing larger roles in what customers want and Dell provides."

Dell did not provide guidance for Q2.

Hewlett-Packard (NYSE:HPQ) CEO Mark Hurd last week told analysts that he was "not ready to call it better," speaking about the current state of the economy and PC demand during his company's earnings call. HP reported net revenue down 3 percent to $27.4 billion. Net earnings came in at $1.7 billion, down from $2.1 billion for the same period a year ago.

Meanwhile, analyst firm IDC released a report this week showing worldwide server sales down 25 percent in the first quarter this year. Much of that decline, which saw market leader HP lose a point of market share to rival IBM, can be attributed to the recession. However, there is another somewhat ironic reason for the decline: Virtualization. One of the fastest growing technology segments, server virtualization has been a bright spot for solution providers, but the consolidation in enables in the data center has reduced the need for new servers.

During his call with analysts yesterday, Michael Dell said that customers are planning a "pretty big 2010 client refresh" /c/a/Dell/Dell-Says-Big-Refresh-of-Enterprise-Client-Computers-Coming-256904/ driven by new processors from Intel and Microsoft's release of Windows 7 operating system. 




Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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