CEO Dell 'Disappointed' With Q4 Results - InformationWeek

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CEO Dell 'Disappointed' With Q4 Results

Despite his company's lower numbers and losses to rivals like HP, Michael Dell looks toward the company's future plan of action.

Dell on Thursday reported that profits and revenues fell in the fiscal fourth quarter, prompting Chief Executive Michael Dell to say he was "disappointed" with the results.

The Round Rock, Texas, company said preliminary results for the quarter ended Feb. 2 showed net income of $673 million, or 30 cents a share, compared with profits of $1.01 billion, or 43 cents a share, for the same period a year ago. Revenues dropped 5.1% to $14.4 billion from $15.19 billion.

"We are disappointed with the company's results, but what matters is our future plan of action," Dell said in a statement. "We are systematically moving to increase efficiencies, improve execution and transform the company."

Sales of desktop computers took a big hit, with revenues falling to $4.6 billion on an 18% drop in shipments year to year. Revenue from mobile products fell 2% to $3.8 billion, despite a 2% increase in shipments.

John Spooner, analyst for Technology Business Research, said in an email that the plunge in desktop sales was the "primary cause" of its revenue decline. In addition, Dell's 2 % increase in notebook shipments in the quarter didn't come close to rival Hewlett-Packard's 57 % increase in shipments in its fourth quarter.

"The PC maker has not yet hit the bottom," Spooner said of Dell. "We believe that Dell will continue to face several tough quarters over the next two years."

While trying to increase sales, Dell will have to deal with reversing customer dissatisfaction and uncertainties around the ongoing financial accounting investigation, Spooner said. At the same time, it will face competition from HP.

On the positive side, shipments of computer servers rose 2% from a year ago, with revenues reaching $1.5 billion. Dell said revenue from storage products was "strong" globally at $600 million. In addition, international unit shipments exceeded U.S. shipments for the first time, driving the mix of revenue from outside the U.S. to 46% of Dell's total revenues.

The No. 1 PC maker is in the midst of a major shake-up that started when its chief executive Kevin Rollins quit in January and Dell returned as CEO to try to reverse the company's 18-month stretch of slowing sales and profits. Dell has been steadily losing global market share to rival Hewlett-Packard.

In a memo sent to employees in early February, CEO Dell said he had suspended bonuses for the most senior executives, with lower employees getting awards on a case by case basis. Dell also said he would trim the number of top managers reporting directly to the CEO in an attempt to streamline operations.

Dell on Thursday said the reduction in employee bonuses contributed $184 million in operating income and 6 cents a share. However, an ongoing federal investigation into accounting and financial reporting irregularities had reduced operating income by $89 million and earning per share by 3 cents.

The company expected growth and margins over the next several quarters to continue to be "under pressure," until changes from the reorganization take effect. "It will take time to realize the future benefits of the improvements we are making today," Dell said.

Dell has listed results for the second, third and fourth fiscal quarters as preliminary, because of the U.S. Securities and Exchange Commission investigation into possible misstatements in financial reports. Depending on the SEC's findings, Dell could be forced to restate earnings from prior periods.

This story was modified on March 1 to include analyst comment.

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