14 DAY TRIAL // It seems that the holiday season of 2009 is no longer a cause of celebration for Dell. While growing demand for PCs and components, and overall strong sales, allowed even Fermi-less NVIDIA to score profits and revenue growth for the holiday season, the same cannot be said for Dell, whose fourth-quarter sales and higher component costs led to profit margins lower than those initially estimated by analysts.
The gross margin stands for the percentage of sales that is left after production costs are deducted. Dell's total amounted to 17.4 percent, which is under the 18 percent initially predicted by analysts. The net income for the fourth quarter also slipped, to $334 million from $351 million of the previous year, which translates into a drop to 17 cents per share from the 18 cents per share. Still, the company has somehow managed to beat analyst estimates in sales, which rose to $14.9 billion, or 16 percent. Analysts initially predicted $13.8 billion sales.
“We’re disappointed with the margin,” Chief Financial Officer Brian Gladden said. The company posted a 4.8-percent decline in the fourth-quarter net income. “We’re disappointed in the profitability, so there’s more work to do there.”
While the gross margin is disappointing, Dell is at least satisfied that it saw a significant growth for the whole year. “We achieved solid revenue growth in every part of our business,” Gladden added. “Our commercial units are well poised for profitable growth as demand continues to return because we’re meeting customer requirements for higher-value, higher-margin servers, storage systems and services. For the full year, we generated $3.9 billion of cash flow from operations – more than twice the amount in the prior year.”
The two elements seen as primary causes for falling short during the fourth quarter are the sales of low-priced personal computers during the holiday season and the high component costs, especially those of memory chips.