Dell revenue falls short of analyst estimates

Dell reported revenue growth in the fourth quarter of 2008, but fell short of analyst estimates
  • Agam Shah (IDG News Service)
  • 29 February, 2008 08:56

Dell reported revenue of nearly US$16 billion for the fourth quarter of 2008, up 10 percent from a year ago, but fell short of analyst estimates.

The company on Thursday reported revenue of US$15.989 billion, short of the US$16.265 billion estimate from analysts polled by Thomson Financial. Dell reported net income of US$679 million, falling 6 per cent year-over-year and short of analyst estimates of US$810 million for the quarter that ended February 1. Earnings per share were $0.31, down 3 per cent from the same quarter of the previous year.

Earnings were affected by US$83 million in charges taken by Dell related to the acquisitions of EqualLogic and Everdream. The company also took a US$54 million charge related to severance costs and facility closures.

The company's sales grew globally. Dell reported a 17 per cent increase in sales in the US, which accounted for 49 per cent of the company's revenue, and a 36 per cent rise in combined sales in Brazil, Russia, India and China.

Over the past eight months Dell reduced its headcount by 3,200, as it continues to address costs and productivity, the company said. The earnings growth puts Dell in a stronger position to address those issues, CEO and Chairman Michael Dell said in a statement.

In May, Dell announced it would lay off 8,800 people -- about 10 per cent of its workforce -- to cut costs. The company will hit that target, said Donald Carty, chief financial officer, during a conference call following the report. He didn't provide a time frame for the layoffs.

The company is vigorously pursuing additional opportunities to cut costs, Carty said. It is looking to update product designs and manufacturing cycles to reduce costs and get products to market quicker, Carty said. The Dell Inspiron 1525 laptop went from concept to manufacturing in less than half the time of its predecessor, leading to a cost reduction of as much as US$70 per unit, Carty said.

Meanwhile, the company is focusing on emerging markets and its consumer business to boost both revenue and profit.

Dell's notebook revenue during the quarter was US$4.8 billion, a 24 per cent year-over-year rise. Dell's mobility unit, which includes notebooks, will continue to rise as notebook shipments outgrow desktops six to one, Michael Dell said. The company's desktop revenue was slightly higher at US$4.9 billion, growing 2 per cent from the previous year.

Dell's PC sales are getting a boost from the retail strategy it introduced last year, Dell said. Dell is now selling PCs in about 10,000 retail stores worldwide.

"Going from zero to a million units in a couple of quarters is pretty darn fast," Dell said. Most of the retail sales have been concentrated in the US, though the company's agreements with European retailers are starting to take effect, Dell said. Dell has signed up European retailers including Carrefour and Tesco to sell PCs. The company's Europe, Middle East and Africa (EMEA) revenue was US$4.2 billion, growing 8 percent. Notebook shipments in EMEA increased 14 percent.

Despite conservative spending by consumers and enterprises rooted in concerns about a possible economic slowdown in the US, Dell will increase its own growth through its retail expansion and other sales strategies, Dell said.