Dell revenue rises despite U.S. consumer business fall

by Agam Shah

November 30, 2007 —

Dell experienced a drop in its U.S. consumer business, but managed to record
revenue growth for the third quarter boosted by an increase in global notebook
sales.

The company reported net income of $766 million or $0.34 per share, for the
third quarter of 2008, compared to net income of $601 million for the year-earlier
quarter. Earnings fell short of estimates made by Thomson Financial analysts,
who projected net income of $785.71 million and $0.38 earnings per share. The
earnings are based on a non-GAAP (generally accepted accounting principles)
basis.

Dell recorded third-quarter revenue of $15.65 billion for the quarter ending
Nov. 2, a 9 percent year-over-year increase.

The company incurred a $50 million charge related to employee reduction and
asset disposals, the company said.

There could be a reduction in headcount in the future as the company looks
to make its business more efficient, said Don Carty, chief financial officer,
on a conference call. The company has an opportunity to automate some tasks
and cut employees that do similar work, Carty said.

On May 31, the company promised to reduce headcount by 10 percent, but it has
failed to do so, instead focusing on acquiring businesses, Carty acknowledged.

"We feel we're making progress, but we're going through transformation,"
Carty said.

Revenue for Dell's U.S. consumer business declined 6 percent, while revenue
from mobility products, including notebooks, increased 19 percent globally,
Dell said in a statement. Revenue from notebooks continues to increase as desktop
revenues decline, Dell said.

Emerging economies are a big part of the company's future, Dell said. Revenue
in Brazil, Russia, India and China combined grew 32 percent, CEO Michael Dell
said during the conference call.

The company is especially focused on growth in China. "We intend to have
a presence across 1,000 cities in China, opposed to 45 cities we have a presence
in today," Dell said.

Dell will improve its consumer PC supply chain by adding distributors globally,
Dell said.

The company recently completed an internal accounting investigation and restated
its financial results from fiscal 2003 to the first quarter of 2007, bringing
it into compliance with listing requirements specified by the Nasdaq stock exchange.

Dell is in the process of restructuring after an accounting scandal, personnel
changes and slow growth in the U.S. PC market. It is also battling Hewlett-Packard,
which is closing in on Dell's position as the leading U.S. PC vendor, according
to surveys.

Michael Dell admitted the company had lost its customer focus when he returned
as CEO in an effort to revive the company after Kevin Rollins resigned. The
company has since launched new distribution channels for consumer PCs and released
new hardware, services and tools to ease management and reduce costs of maintaining
IT systems for enterprises.

Through its supply chain, Dell will be able to combine hardware, software and
services in one package to customers, Dell said. The strategy of helping customers
simplify IT is part of a new business model to generate sustained returns, he
said.

It released a new line of PowerEdge servers to expand its presence in data
centers and recently signed a deal with Sun Microsystems to distribute the Solaris
OS on its PCs. It also signed a deal Google to sell its search appliances.

Dell this month also agreed to acquire SAN (storage area network) vendor EqualLogic
for $1.4 billion, and desktop services management company Everdream for an undisclosed
amount.

The acquisitions are in line with the company's new strategy to provide a range
of hardware and IT services to users, Dell said.

IDG News Service