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Dell posts a 48% year-on-year decline in profit

27 February 2009 10:34 (UTC +04:00)

Bakuâ€“ APA-Economics. Dell Inc. on Thursday reported a fiscal fourth-quarter profit that fell 48% from a year ago as sales across all its main business areas declined and the company absorbed large charges for its on-going reorganization, MarketWatch reported.
And as part of that reorganization, Dell added that it has found additional areas to cut expenses, thereby allowing it to raise its overall cost-reduction target from $3 billion a year to $4 billion.
"We are focusing on things we can control," said Brian Gladden, Dell’s Chief Financial Officer, on a conference call to discuss the results. "We see opportunities to lower our expenses and we’re beginning to see the benefits of our actions."
Dell said that for the quarter ended Jan. 30, it earned $351 million, or 18 cents a share, on revenue of $13.4 billion, down from the same period a year ago when Dell earned $679 million, or 31 cents a share on almost $16 billion in revenue.
Those results include pre-tax charges of $277 million, or 11 cents per share, for the company’s restructuring. Those charges included $134 million in what Dell called "organizational effectiveness" expenses and $143 million in stock-based compensation.
Excluding those charges, Dell would have earned 29 cents a share for the quarter.
Analysts had forecast Dell to earn 26 cents a share on $14.1 billion in sales, according to consensus estimates from FactSet Research.
In after-hours trading, Dell’s shares rallied as much as 5% to $8.62 a share. The stock has been trading at some of its lowest levels in nearly 12 years.
The results confirmed many analysts’ expectations that Dell had been hit hard by the worldwide economic slowdown and declines in spending on technology products.
"The top-line looks weak and looks like they cut some costs, but a sizeable decline in its gross margin is likely to cause some concern," said Shaw Wu, an analyst with Kaufman Bros. Dell said its gross margins came in above 18%.
Sales across all of Dell’s main business areas were down during the quarter. The company said its Americas Commercial revenue fell 17%, to $6 billion, while commercial sales in Europe, the Middle East and Africa also declined by 17% from a year ago, to $3 billion.
Commercial sales in Asia and Japan fell to $1.4 billion, down by 24% from a year ago, while global consumer sales of $3 billion fell 7% over the year-ago quarter.
Dell highlighted cost reductions during the quarter, saying it cut its operating expenses by $363 million during the, to $1.86 billion.
The company had previously set a goal of cutting $3 billion in expenses by the end of its 2011 fiscal year. However, Gladden said the company now has "a clear view to additional opportunities," and raised Dell’s cost-cutting target to $4 billion.
Gladden didn’t give many details about how Dell would reduce its expenses, but said the main sources of cost cuts would come from lowering the company’s operating expenses and reducing its costs of goods sold.
The company didn’t give any exact earnings or revenue forecasts for its current, fiscal first quarter, aside from Gladden saying that Dell expects to record "operational effectiveness expenses" similar to the $134 million it took during its fourth quarter.
However, Gladden added that the decline in business is likely to continue for some months to come.
"The trend we saw late [in the fourth quarter] and early in our first quarter is still negative as customers continue to defer purchases," Gladden said. "We can not predict how deep or long this slowdown will be, though we’re planning on it to be protracted."
For Dell’s current quarter, Wall Street analysts estimate the company will earn 25 cents a share on $13.5 billion in revenue