Updated at 1:55 p.m. PDT with information from the earnings call. Also corrected decline in operating expenses.
The quarter that ended on May 1 was a rough one for Dell.
The PC maker announced Thursday it recorded a net income of $290 million for the first quarter of fiscal year 2010, and earnings of 24 cents per share, or 15 cents per share when accounting for write downs from severance pay and factory closings during the quarter. That's down 63 percent from the $784 million, and 38 cents per share recorded a year ago. Revenues were also down 23 percent to $12.3 billion.
Analysts on average had been expecting revenue of $12.66 billion, and earnings between 19 cents and 27 cents per share.
"It started out as a slow first (fiscal) quarter. It picked up a bit in the second half of the quarter," Chief Financial Officer Brian Gladden said on a call with reporters Thursday. But he said it was "still a challenging IT demand environment" and emphasized that Dell is not yet ready to say that the drop in demand has yet reached its lowest point.
Dell has been saying for the last few quarters that since its core customer base--corporate IT departments--are being battered by the economy, it would try to focus on internal housekeeping tasks like cutting expenses and operating costs. Gladden said the company's operating expenses had fallen by $101 million from the previous quarter and by $312 million from a year ago.
Despite that, Dell is still facing major challenges. Revenues decreased in every major business unit significantly, though a relatively bright spot appeared to be the consumer group. Consumer revenue was down 16 percent to $2.8 billion, and consumer shipments rose 12 percent from a year ago. It's been spending much more on research and development on products down in Round Rock, Texas, and produced yet another Netbook, and more notebook models--including the high-priced Adamo--during the quarter.
The company also continued to expand the number of places its PCs can be bought: there are now 30,000 retail outlets worldwide, which is contributing to the growth in the consumer business.
But retail is clearly not the singular solution. Dell needs to do something to turn the ship around, which might come from outside the company. It has not taken the option of an acquisition to achieve quick growth off the table. IBM is suing to keep its former M&A chief David Johnson from joining Dell, which has reportedly offered him the position of vice president of strategy. Gladden on Thursday declined to discuss Johnson's hiring, but did say that mergers and acquisitions would "continue to be an important part of how we build the company."
"We've done 13 or 14 acquisitions in last few years. We're not sitting back and watching other companies do consolidation," he said.