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Dell income plunges 63% in early 2009

updated 09:40 am EDT, Fri May 29, 2009

Dell Income Drops 63pc

Dell late yesterday reported bleak results for the first calendar quarter of 2009 that showed it faring poorly in the economic climate. The Texas PC builder's net income dropped a full 63 percent from the same quarter a year ago to $290 million and was hurt primarily by rapidly shrinking business sales in the world economic collapse. Large, enterprise-level business revenue fell a significant 31 percent, indicating a steep drop in PC shipments, and was nearly matched by a 30 percent drop in small- and medium-sized business revenue.

In its regular home PC business, the company produced mixed results: although its actual unit shipments were up by 12 percent, its revenue from these sales declined by 16 percent. The discrepancy reveals a shift towards lower-cost PCs, though Dell doesn't say whether the decrease stems from its growing netbook line or simply from sales of lower-end models in its regular line. Some of Dell's key introductions in the period were for high-end systems, including the Adamo 13 ultraportable and the Studio XPS 435.

The company declined to detail the number of PCs shipped. To address the problem, it says it's continuing cost-cutting efforts and also expects a large amount of PC replacements in the corporate world later on in 2009 with the releases of Windows 7 and Windows Server 2008 R2 towards the end of the year.

Dell's performance stands in contrast to immediate competitor Apple, whose Mac shipments declined 3 percent but were countered by a year-over-year increase in income. Apple doesn't currently participate in netbooks and has a typically higher-priced lineup less sensitive to economic conditions. It also doesn't participate as heavily in the enterprise space and so isn't as subject to risks in corporate spending.



By Electronista Staff
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Comments

  1. phillymjs

    Fresh-Faced Recruit

    Joined: Jun 2000

    +13

    First...

    ...'shut it down and give the money back to the shareholders' post!

    See, Dell? This is why Apple refuses to engage in your ridiculous "race to the bottom" profit margin competition nonsense. When people even stop buying cheap, crappy PCs, you have no money and things look bleak.

  1. chotty

    Fresh-Faced Recruit

    Joined: Jan 2003

    +10

    True, Dat!

    'Couldn't happen to a nicer guy...

  1. Salty

    Professional Poster

    Joined: Jul 2005

    +14

    Dude...

    Dude you're getting... no customers...

  1. Constable Odo

    Fresh-Faced Recruit

    Joined: Aug 2007

    +9

    So why are analysts

    always so stern about saying Apple should lower it's prices to compete with the rest of the industry. It's just sheer stupidity on their part. It appears they don't understand how important profit margins are. They think that market share is everything. Dell is offering lower prices and nothing else. They've taken the value out of their computers and customers.

    Build $300 netbooks, they say, merely to supply the bottom feeder computer buyers. I'm glad Apple didn't bite. Apple is not in business to lose money and no business should be. Make your product attractive to customers and charge them for it. Even the customers will appreciate that much.

  1. manleycreative

    Fresh-Faced Recruit

    Joined: Sep 2005

    0

    2nd...

    Yep, Dell's dead...

  1. testudo

    Forum Regular

    Joined: Aug 2001

    -1

    Gee

    Wow, who would've expected this? Dell makes most of their money from the enterprise. With the state of the economy, sales are down big time. Thus, profit is down. But they're more likely to go back up when the economy improves, too.

    Apple's better off to weather the storm because (a) they don't have much in the way of an 'enterprise' market, and (b) their computers are high-end, and high-end computer users aren't feeling the economic pinch as much as those in the lower income brackets.

    But, hey, its more fun to not understand that and just make fun on the fact that they had a bad quarter! Woohoo!

  1. Constable Odo

    Fresh-Faced Recruit

    Joined: Aug 2007

    +3

    Will Dell spring back

    that quickly when the economy gets better? That might depend upon whether corporations decide to upgrade to Windows 7. If they don't, they'll continue to use the same computers and continue to run Windows XP. I don't think corporations are going to start using netbooks because that wouldn't be good for them or any computer manufacturer.

    Maybe Dell shouldn't have built such a high reliance on corporate sales and diversified. Still, a lot of companies didn't see this poor economy coming. HP didn't get hit as hard as Dell and they are similar companies.

  1. joecab

    Fresh-Faced Recruit

    Joined: Apr 2004

    +2

    not dead, but HP's better

    HP's more diversified anyway, right? I can't imagine Dell has a lot of fat to cut away, and competing by price is a losing game for everyone except consumers ... so they need some new revenue streams from somewheres.

    Well, I hope this means Dell will be less reluctant to try new things that are ultimately doomed to be also-rans, like more "iPod killers." I wonder what their R&D budget is like?

    Also ... everyone should throw the "shut [Apple] down and give the money back to the shareholders" quote in their faces at every oportunity because schandenfreude is fun, and karma is a beeyotch. ;)

  1. MacnnChester

    Fresh-Faced Recruit

    Joined: Jun 2007

    -1

    testudo

    This is about business plans and effective R&D in a creative/tech industry.

    Dell revolutionized the business model, like any good MBA, but stopped there. Apple approaches the market in multiple layers and from multiple directions and never forgets that it needs to be the most creative tech company in the industry.

    Dell was never interested in that because it has a business model independent of creativity - 'a la GM and Microsoft.

    Dell is may bounce back, and then maybe it won't, but it will be dependent upon MBA's not software engineers and designers to survive and that is what it can only hope for - survive, not innovate. When you run a company to impress Wall Street these things happen.

  1. testudo

    Forum Regular

    Joined: Aug 2001

    -1

    Re: Will Dell

    Maybe Dell shouldn't have built such a high reliance on corporate sales and diversified. Still, a lot of companies didn't see this poor economy coming. HP didn't get hit as hard as Dell and they are similar companies.


    They didn't build a high reliance on corporate sales. Maybe you didn't realize they also sell to consumers, and do a big set of business there. Their "problem" is they had such a high share of the enterprise market that when that tanked in the quarter, so did their profits from it.

    But you really think that when the enterprise picks back up they're going elsewhere? Where, to Apple? Please. And there's more to the enterprise than just low-end computers running email and word.

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