Channel Insider content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

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" /news-and-trends/dell-says-big-refresh-of-enterprise-client-computers-coming// driven by new processors from Intel and Microsoft’s release of Windows 7 operating system.