RSSDell Cautiously Enters New Era with Weak Q4 Earnings
By Scott M. Fulton, III | Published March 2, 2007, 1:42 PM
With the prospect of substantial financial corrections still looming over the company, Dell Computer hasn't been able to present its usual, detailed comparisons of present performance compared to past. So analysts late yesterday were given a preliminary fourth-quarter fiscal year 2007 earnings report, on top of a recently issued third-quarter report that still remains preliminary. Those who were able to do the math for themselves came to a daunting conclusion: Dell's not growing.
Financially speaking, the task ahead of new Dell CEO Michael Dell - who re-assumed his old post last month - is not impossible. His company isn't exactly hemorrhaging or even bleeding cash. It's just in a low-margin business where, even in segments where sales aren't declining, profits aren't accumulating. The big task ahead of Mr. Dell is restoring public trust in his company.
But for yesterday, the focus was on the numbers, which aren't grim but aren't redeeming either. Assuming Dell's preliminary numbers are close to accurate, the company took in one tenth of one percent more in revenue than in the previous quarter, with $14.4 billion gross. But gross margin rose by just 0.6% to 17.1% of revenue, keeping earnings low at $673 million - $4 million less than the previous quarter.
Analysts compared this last holiday quarter to fiscal 2006, when Dell enjoyed a nice kick in the right direction. In February 2006, the company reported over a billion in income on $15.2 billion in revenue, on 17.8% gross margin. That quarter looked even at the time to be an aberration, with non-holiday quarters at around $650 million - about where they are now.
Nonetheless, the word on the street looked bad: A 33% annual drop in quarterly profits for Dell - never mind the fact that Q4 FY 2006 was so stunning.
There were really no stellar performers among Dell's market segments, although the company did credit new AMD-powered computer lines for helping to help stem what might otherwise have been a very negative tide. While revenues from desktop computers declined by 18% annually to $4.6 billion - and declines in desktops aren't unexpected - revenue from notebook computers declined also, by 2% to $3.8 billion, even though unit shipments in that segment rose by 2%.
Perhaps the worst part of that news was the 2% gain, which is not considered strong given the fact that notebooks constitute the fastest-growing segment of business and home computing.
In a statement yesterday, Michael Dell pleaded with investors to give his company time to find its footing again
"We won't achieve our goals overnight, but we will achieve our goals," he wrote. "We will be known again for strong operating and financial performance and a great experience for our customers. But it will take time to realize the future benefits of the improvements we are making today."
Given that Dell is busy working out a few details regarding its numbers, it may just have to get back to us later with regard to how much time that might take.
I still think that the increase in the number of desktop computers being owner built is on the rise. All of my PCs were built at home. Users are becoming more demanding and when you build your own computer you know exactly what you have. This is bound to impact all the major system builders.
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|Mike may have come back too late. Just listen to the comments here--most of them show how badley Dell's reputation has changed since 2003. Hopefully Michael Dell can turn it around before Dell collapses.
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|The educated consumer is not Dell's target market group, which is unfortunate, because they are the ones who wind up needing Tech Support the most. What Dell makes in sales, it is losing in Support. I personally was offered a DJ Dity because I complained for having to be on the phone with Dell for 3 hours. I guess the guy didn't want a bad "Customer Experience" survey. So, I got the DJ Dity, and he still got a bad review from me.
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|Been using Dell for years at work and home - no complaints.
Everyone knows M. Dell is attempting to turn around a flailing company. "Keeping earnings low at $673 million" - no tears here.
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|They've been cranking out that awful, cheap laptop with the trapezoidal indented touch pad for years. Everything about it sucks and if you have to reformat, plan to spend a day trying to get off the OEM installed hardware drivers.
My wife's entire family keeps buying that peice of s*** for thier kids as they go away to college and me being the only computer savvy person in the family keep getting screwed with the kob of fixing them when they load them up with spyware and virii.
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|"My wife's entire family keeps buying that peice of s*** for thier kids as they go away to college and me being the only computer savvy person in the family keep getting screwed with the kob of fixing them when they load them up with spyware and virii."
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Sounds like it would be useful for you do less approval seeking and stop fixing their computers, Hollywood.
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|dolcesculacciare, I doubt your story, but that just sounds weird.
I can understand if you overclock it yourself, but I question your rights within your warrenty, to be honest I am not sure where I am going on this one.
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|it was 2 months ago when i made the inquiry and that's what they said... no reason to make it up... perhaps they got the message... more than anything, it speaks to the volumes of crap you have to wade through to find out what you're buying... and a host of other issues... caveat emptor !
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|And its not rocket science to figure out why they aren't growing or making any money anymore...
DELL makes VERY marginal products and then expects buyers to eat it up?
No thanks. I'll buy an Apple which has better performance, better looks, better support, better resale value, better hardware and I will spend about the same amount of $.
...and I can dual boot XP and OSX!
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|One look at their product line, the totally unintelligible configuration options, bloated add ons, hidden mark ups, and 3rd world service, and it's no wonder... Unfortunately their competitors rushed to follow Dell's business model, so they virtually all stink at the same game... and finally... not much in the article about the customer... give them good products at a reasonable price, eliminate the subterfuge, and support the product and they'll come flocking back...
You know, I talked to a sales person at Dell... they were offering an overclocked CPU, an E6800"G" I think it was, for +$300, and when I questioned the validity of the warranty if the overclocking toasted something, they replied that the warranty wouldn't cover it... well charge me for being stupid why don't you Dell... what a farce !
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|http://reviews.cnet.com/...05-3118_7-32305739.html
Overclocked and under warranty.
That took me about 4 seconds of searching, by the way.
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