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Dell's Q4 Profit Misses Expectations, Spreads Panic Among its Shareholders

The company is undergoing important changes that might affect its short-term revenue

Feb 29, 2008 11:06 GMT  ·  By
There's a lot of work to do for Dell to keep it's business model viable
   There's a lot of work to do for Dell to keep it's business model viable

World's second largest PC manufacturer Dell has just received the revenue reports for the three month period that ended on February 1st. The company posted a lower-than-expected quarterly profit and warned that customers may rein in spending.

Despite the lower-than-expected profits, the company had a great presence on the market during the third quarter and its revenue grew by 10 percent on year to reach $16 billion, but stood at $679 million, down 6.4% compared to the same period of fiscal year 2007. The net income for the last three months fell to $679 million, or 31 cents per share, from $726 million, or 32 cents per share, as it was in 2007.

However, Dell is not moving on quicksands. On the contrary, as compared to the previous year, the company has managed to ship 19 percent more units during 2007, and revenue rose to $16 billion from $14.5 billion.

Dell representatives claimed that it would "continue to incur costs as it realigns its business to improve growth and profitability," which could unleash side-effects to the short-term financial results. According to the company, revenue from laptop computers rose 24 percent in the fourth quarter, while the revenue from server computers and data storage equipments gained a faint two percent, just like desktop system revenue.

The company's revenue is safe, yet Dell is bleeding money in charges. For instance, the company has fired no less than 3200 employees in the last eight months to cut costs down, but the process cannot end here. The company has yet to restructure and cut down on expenses.

Donald Carty, the company's vice chairman and chief financial officer, admitted the problem and said that "we clearly have a lot more work to do on cost." However, this is the first time for Dell to post double-digit quarterly growth. "While we have been reducing heads, we have been increasing heads on front line activity," Carty said. "[Still] we are going to hit that 8,800 target. We have a high degree of confidence that we have a clear line of sight in getting these costs out of the company."