Dell Sales, Profit Take a Hit in Q4

Dell on Thursday reported a 48 percent decline in fiscal fourth quarter profit compared with a year ago as the company felt the pinch from the economy. A portion of that was attributable to a one-time charge for reorganization, but most of the pain came from declining sales across all of Dell's markets.

After the close of the stock market, the company reported a net income for the quarter ended January 30, 2009, of $351 million, or 18 cents a share, on revenue of $13.4 billion. Analysts polled by Thomson Reuters were looking for 26 cents per share.

That compares poorly to the January 30, 2008 quarter, where the company posted earnings of $679 million, or 31 cents a share on $15.9 billion in revenue.

The PC maker has been attempting to broaden its reach and make its products available in more countries, but even those countries were suffering. The company said its Americas Commercial business fell 17 percent, as did commercial sales in Europe, the Middle East and Africa.

In the quarter, the company took a pre-tax charges of $277 million, or 11 cents per share, for restructuring. It would have easily surpassed analyst expectations without those charges.

But those cost cutting efforts paid off in that the company said it cut its operating expenses by $363 million for the quarter. The company had previously set a goal of cutting $3 billion in expenses by the end of its 2011 fiscal year but now expects to save $4 billion.

All told, operating expenses were down 20 percent year over year, with $152 million in savings in Q4 alone, according to Brian Gladden, senior vice president and chief financial officer of Dell. Headcount was down 11 percent year-over-year.

Gladden told a conference call of financial investors that Dell's direct sales model gave it an indication of a coming sales slowdown sooner than its competition, and the company was able to adjust accordingly well in advance.

"We saw the shift in early 2008 and updated our forecasts throughout the year," he said. "We saw significant deterioration in demand in Q3, while Q4 was more linear with prior quarters, but the trend is still negative as customers continue to defer purchases. We can't predict how long it will be, but it will be protracted."

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