Dell currently has about 88,100 workers worldwide, which means about 8,810 jobs will be eliminated, said Dell spokesperson Bob Pearson. Its total head count is made up of 82,800 permanent, and 5,300 temporary and contract workers, of which all may be affected by the cuts, Pearson said. No specific business unit will be targeted, he said. Instead, Dell wants to rid bureaucracy and redundancies, independent of geography or business, Pearson said.
Because it has not yet filed its 10-Q quarterly earnings paperwork with federal regulators, Dell did not hold a conference call to discuss its preliminary earnings and its spokespeople provided scant comment. How much it expects to save as a result of the job cuts is not yet known.
This is a clear sign of progress for us, Pearson said of the recent numbers, for its first full quarter since founder Michael Dell returned to take the CEO reigns from former chief Kevin Rollins, who resigned.
For its quarter ended May 4, Dell posted a small drop in profit, from $762m to $759m, and earned 34 cents a share this quarter, versus 33 cents last year.
Strong enterprise business, mostly for storage and servers, drove an overall 3% increase in revenue, Pearson said, to $14.62bn from $14.22bn a year ago. This beat Wall Street’s average forecasts of 26 cents a share and revenue of $13.95bn, according to Thomson Financial. The results are preliminary because of an ongoing investigation into prior accounting irregularities, which has delayed its 10Q flings for its fiscal 2007 year that ended in February.
Compared to a year ago, revenue for storage grew 13% to $500m. And server and networking revenue combined grew to $1.6bn from $1.3bn a year ago. Dell said server sales along grew 19% year-over-year.
Desktop PC sales slipped in the quarter to $4.9bn from $5.1bn a year ago. Notebook and other mobile products were slightly up at $4bn versus $3.7bn last year. Dell’s so-called enhanced services, which Pearson said was IT service for Dell products, came in at $1.3bn, which was down slightly from $1.4bn last year.
The company also pointed to a favorable decline in component costs, which contributed to a 14% increase in the average selling price of all devices. This likely included microprocessors.
Despite these modest gains and HP’s new strategic direction, which includes direct retail sales and ongoing internal restructuring, Dell continues to struggle to keep pace with rival HP. Based on research from Gartner, Dell’s global PC shipments fell nearly 8% to 8.7 million units during the first calendar quarter this year, while HP’s rose almost 29% to 11 million units.
Pearson noted that it was the second sequential quarter in which Dell sold more units internationally than it did in the US.
Dell did not provide outlook for its current quarter, other than operating margins would be under pressure during what is a seasonally slower quarter. Dell also expects higher operating expenses and additional costs related to the ongoing investigations. Also component costs likely will rise during the second half of the calendar year, said a company statement.
Shares in Round Rock, Texas-based Dell rose more than 5.5% to $26.91 in after-hours trading on the Nasdaq yesterday.
Our View
Despite what seems like a decent recovery quarter for Dell, the bottom line is Dell has not yet got a grip on its slipping PC business. Cutting jobs will help keep Wall Street happy for the time being, but it won’t do much to reinvigorate its PC line-up to better compete against HP.
Dell did not do great – it grew revenue a scant 3% – just not as bad as expected. HP, meanwhile, posted a robust 13% increase for its most recent quarter ended April 30, driven by PC and notebook sales, as well as printers. Michael Dell has much work ahead of him before Dell can declare a turn around.
