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February 27, 2009

Dell profits slashed in business revamp

Glimmer of hope seen in Windows 7

By CBR Staff Writer

The cost of taking out 9,300 jobs and other restructuring expenses helped halve final-quarter profits for Dell Inc, which last night released figures showing it made $351 million, on sales of $13.4 billion in its fourth quarter.

The downturn in IT spending could not have come at a worse time for the PC maker, which has been caught in the middle of major reorganisation that will see the business organised into four units to focus on large enterprise, public sector, small and medium business, and consumer markets as it works towards a cost reduction goal of $4 billion by the end of fiscal 2011.

For the full fiscal year, Round Rock, Texas-based Dell posted a $2.47 billion profit on $61.1 billion in revenue. In the year-ago period it did $2.94 billion on $61.1 billion in revenue.

In EMEA the revenue line was essentially flat from the previous year, providing $13.6 billion. The company reckons it is still number one in the Americas, but for the full fiscal year there its revenue was $28.6 billion, a 5% decline against the previous 12 months.

Dell faces all sorts of problems.

On top of the cold economy, consumers are moving in increasing numbers to low cost netbooks and smart phones as their preferred computing device.

Enterprises are consolidating servers wherever they can, and Dell has a very limited services business, compared with other PC and server-making rivals like HP and FSC, and it is facing increased competition from Acer.

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Worse of all, there is absolutely nothing driving corporate desktop refresh, and the Dell CEO could only say that the eventual release of Microsoft’s Windows 7 operating system, could help invigorate corporate PC buying.

“We’re starting to get pretty excited about Windows 7 and believe it’s going to be an important catalyst for growth,”said Michael Dell.

Last month, Dell announced the closure of its main European plant, at Limerick, Ireland, with the loss of 1900 jobs.

 

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