Dell earnings down 63 percent from last year

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.

[slickuser]

Where is the nearest bankruptcy court?

[iff2mastamatt]

..or maybe the stock is under valued?

[BogusBasin]

They should close down and give the money back to the shareholders.

[Mr. Dee]

Sounds like Dell is going to hell. I hope they have learned their lesson, when you put Linux on your systems, no one is going to buy them and you will not make any money.

[Vegaman_Dan]

I don't think it has anything to do with the OS offered. IT departments worldwide had their budgets slashed and without money, you can't buy anything.

[FearNo1]

How did giving customers an additional OS *option* hurt dell?? Besides, Dell computers are built to order... It was the slumping economy and competition amongst laptop makers that lowered their profits. I doubt if any computer hardware company is that profitable these days...

[Bob Kakis]

Michael Dell should shut down the company and return whatever money is left to the shareholders...

Michael Dell can go to H%$#

[solitare_pax]

Hey dude, I did my part - I bought a Dell.

[Random_Walk]

Funny, but the crappy Dell R900s I got stuck with (with their constant DIMM SB errors) came without any OS at all, and break equally no matter what OS is on one. Care to 'splain that?

(meanwhile, I happily ordered HP DL-580's for the next round of servers...)

[pentest]

Another worthless comment from DeeDeeDee.

[GO ILLINI]

You do realize that they still sell windows computers... right?
Just checking...

[lighthorse987]

With their current problem solving ability, I can see one reason they're in trouble. I bought their most expensive laptop and had to jump through hoops to get it replaced when it totally malfunctioned within a couple of weeks. The replacement they sent was configured with far less software than my original. I'm still trying to get that corrected. Total time with Dell on the phone - over 16 hours; number of people spoken to - about 20! No end in sight!

[nrl1]

Dell offered Linux, but they also offer Vista or XP. How would that hurt them?

[Random_Walk]

Even more - Dell "Recommends" Windows Vista, but not any other OS.

[pentest]

Recommending Vista is a sure way to hurt yourself.

[mralbones]

My company tried to get a quote from dell for a $50,000 storage system and the 'channel' sales people tried to push the dell product on us, instead of the emc which we asked, then refused to give us a quote. We called to get a manager, and haven't had a call back, they won't take our calls.

Needless to say were done with Dell.

Oh yeah, never buy a dell laptop...

[Vegaman_Dan]

Three year product cycles are common for enterprises. Companies largely skipped Vista and the product cycle has come about again to last year / this year. I think we'll see that improving with Win7 and the economy coming back, but it will take time.

[BogusBasin]

Quote your sources! If you were attempting to portray yourself as knowledgeable, you have failed. Why don't you complain to CNET and get somebody banned for disagreeing with you?

[monkeyfun14]

Damn BogusBasin is back and here I was hoping he was banned.

[pithenumber]

@Bogus
3 year cycles are common for many companies

[ppgreat]

The new Gateway?

[Bob Kakis]

Dell offers such a horrible customer experience. I bought 2 Dell laptops 2 years ago. Both were DOA. The experience was worse than getting it up the a** - and I am a happily married heterosexual man - so that activity is not fun for me (not that there is anything wrong with that).

Anyway, I would rather get a root canal than deal with Dell

[inachu]

More people would buy a DELL pc if only DELL did the following.
a. Bring jobs back to USA
b. Longer hardware support for issues such as bios patches.
c. Early adoption of certain technologies (USB 3.0)
d. have better partnership with d-link and drop any and all linksys partnerships(i have owned 7 linksys products and all but one failed... the switch)

[xdcdell]

Overall high opex that hurts Dell --> layers over layers of senior management in mature PC products, high number of expats and decision making is still back to Texas.

[ExWinUser]

More people are buying Macs and Dell only offers Vista for Home PC's. Everyone knows Vista is the worst OS of all time.

[GO ILLINI]

Please compare it to ME for me ;).
Also enjoy this article I read: "The 10 Worst Operating Systems of All Time"
http://www.pcworld.com/article/162866/worst_operating_system.html?tk=rss_news

[ahickey]

Dell had net income of $290 million on $12.3 billion. Not the strongest numbers but by no means a complete fail.

I'd like to see how much they wrote down for the cost for severence pay and fatory closures.
These are cost that have been consumed in this quarter but will not be there in the future. This with the reduction of costs by $300m it puts Dell in a more solid position.

They got their wake up call and taking actions.
People are still buying Dell's and I expect thety will come back stronger.

[zelrik]

Dell is in a transition phase, it's only normal that their earnings are falling. They chose to make big changes within the company at the wrong time...who knew the economy would crash like that.

[johnjoda]

Build a better product. The oldest Adage in business.

The current low end products from Dell are not recognisable when compared to their entry level products they built themselves.

There may also be an affect of people waiting for 7 (I tell people to)

Build quality, people will pay for that.

[a_flores]

Hard to find a good looking (beautiful) Dell laptop and netbook. Practically all are ugly. Why?

[zearam]

Dell's customer's are not happy. Unless they can fix their policies I do not see how they are going to recover. Your profits are going to continue fall if you customers do not want anything to do with you. Most people I know avoid Dell now as they would the plague due to bad experiences they have had with them. http://www.resellerratings.com/store/Dell has much negative feedback with this company.