New Delhi: Dell Inc posted a sharper-than-expected fall in quarterly revenue as consumers bought cheaper personal computers and overall demand remained weak, but cost cuts helped profit beat Wall Street forecasts.
Shares of Dell rose 1.6% in a relief rally as investors had feared the results would be worse, after bigger rival Hewlett-Packard Co last week posted disappointing quarterly revenues and cut its full-year outlook.
Dell also boosted its fiscal 2011 cost-reduction target to $4 billion from $3 billion, signaling a continued focus on the bottom line, but declined to discuss any possible job cuts.
“I think the market was beginning to price in Doomsday results,” Edward Jones analyst Bill Kreher said after Dell’s results on Thursday. “Dell continues to go for profits over growth, and costs are one level that the company can control and they are successfully executing on that.”
The company did not provide a financial forecast but it did not mince words about the weak demand environment.
“We cannot predict how deep or long this slowdown will be, though we’re planning on it to be protracted,” chief financial officer Brian Gladden said on a conference call with analysts.
“We’ll be the first to admit that this is a work in process and that there’s more to do,” he added.
PC sales make up around 60% of Dell’s revenue, leaving the company -- the world’s no. 2 PC maker, behind HP -- exposed to a crippling falloff in demand.
Dell has been in cost-cutting mode for some time, shedding jobs and overhauling its corporate structure. It said its headcount was down 11% from a year earlier to 78,900.
The company said it decided to conserve cash in the quarter, forgoing share repurchases, and ended the quarter with $9.5 billion in cash and investments.
PROFIT, REVENUE DOWN SHARPLY
Net profit in Dell’s fiscal fourth quarter ended 30 January fell 48% to $351 million, or 18 cents a share, from $679 million, or 31 cents a share, in the year-ago period.
Excluding special items, profit was 29 cents a share, above the 28 cent average estimate by analysts, according to Reuters Estimates.
But revenue fell 16% to $13.4 billion, missing analysts’ average forecast of $14.06 billion. Dell cut operating expenses by 16 percent in the quarter.
Kaufman Bros. analyst Shaw Wu was skeptical of the results, and blamed the stock bounce on investors who have grown accustomed to technology companies missing top line estimates.
“My takeaway is more of the same, the quality of earnings continues to be suspect, they’ve been cutting costs but that’s not new,” he said.
Analysts say Dell is more vulnerable to the slump in PC and computer hardware demand, compared with HP or IBM, and investors have beaten Dell’s shares down more than 65% over the past six months. HP’s shares are down around 35% over the same period, and IBM’s are off 30%.
Dell said its global consumer division saw shipments rise 18%, boosting its global market share to nearly 9%, but as more consumers bought lower-priced notebooks and desktop PCs, revenue fell 7% to $3 billion.
Dell’s Americas commercial business saw revenue fall 17% to $6 billion, with units falling 23%.