News

Dell Profit Falls As Revenue Grows

By Stephen Lawson

August 28, 2008 — IDG News Service —

Dell posted a decline in profit for its fiscal second quarter even as its revenue grew, while economic doldrums held down its results in some parts of the world.

The company's revenue grew 11 percent in the quarter ended Aug. 1, led by a 28 percent gain in the global consumer business and growth in laptop PCs, which brought in 26 percent more revenue than a year earlier. However, revenue in both those categories was down slightly from the second quarter.

Dell reported net income of US$616 million, down 17 percent from $746 million a year earlier. Earnings per share declined to $0.31 from $0.33.

The huge PC and server maker saw continued economic weakness, particularly in the U.S. and Western Europe, said Brian Gladden, senior vice president and chief financial officer, on a conference call with reporters after the results were announced on Thursday.

Dell used aggressive pricing to gain a stronger foothold in Europe, eating into its margins, Gladden said. But the company continues to reduce its costs and expects to complete its workforce cutbacks in the current quarter, he said.

Revenue rose to $16.4 million from 14.7 million a year earlier. In addition to the large gain in mobility revenue, the services business saw growth of 14 percent and storage revenue was up 11 percent.

Revenue from servers and networking gear increased just 5 percent, but Dell said that was nearly twice the growth rate for that industry segment. Only the desktop PC business had lower revenue, with a dip of 5 percent from a year earlier.

Unit sales grew much more -- 44 percent for laptops and 19 percent for servers -- but average selling prices were down significantly from a year earlier.

Dell said it outperformed its major competitors in all regions and gained market share in all major product categories. The company also said it regained its lead position in flat-panel displays.

Customer interest in cloud computing, which uses a scalable, distributed infrastructure to deliver IT capabilities as services, is helping to drive broad-based increases in demand from enterprises, executives said.

For the remainder of the year, Dell expects to see continued conservatism in IT spending in the U.S., spreading somewhat to Europe and Asia.

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