Dell earnings down 54 percent

Declining shipments drag down the company's third-quarter earnings. The company also reports that revenue was down 15 percent compared with last year.

Dell reported its third-quarter earnings results Thursday, showing a small improvement over the last quarter, but revenue was down 15 percent over the last year, and profits fell 54 percent.

The company reported revenue of $12.9 billion, within analysts' expectations between $12.8 billion and $13.5 billion. Earnings were 17 cents per share, when excluding 6 cents of pretax expenses and amortization. That's 54 percent off the 37 cents Dell recorded a year ago.

Besides its acquisition of Perot Systems last month, there weren't too many positive signs in the recently completed quarter. Shipments were also down 5 percent across its businesses.

Chief Financial Officer Brian Gladden pointed to built-up inventory and weak pre-order demand for Windows 7 machines as something that negatively affected the company's quarterly results.

"We saw some weakness in orders in some of the weeks preceding Windows 7... our inventories were in place and people were waiting to see how the launch went," he said on a conference call with reporters Thursday. "After the (October 22) launch we saw a surge in orders. We believe that affected our October revenue a bit, but we'll ship that through in the fourth quarter."

Gladden did try to point out more positive signs for the company during the quarter, noting, "We significantly improved over the 23 percent (quarterly revenue) decline from earlier this year."

He said Dell has been focusing as much as possible on decreasing its costs and building back its enterprise business. The company was hit particularly hard by the economic downturn of the past year due to its heavy investment in business customers, but things are beginning to look up now, according to Gladden.

"These results are showing some encouraging signs for us, especially in large enterprise and SMB (small and medium businesses)," he said.

Founder and CEO Michael Dell said he expects companies to begin to order new PCs as part of the so-called "refresh" cycle starting early next year.

"With an aging install base ... an accumulation of new technologies with hardware, software, virtualized clients...IT managers know they can't extend these assets forever," Dell said. "I think it will be a refresh that occurs over perhaps 18 months. I can't remember a time when a high percentage of (IT managers) skipped an entire operating system."

Gladden spoke more specifically about two consumer segments. On the just-announced Dell Mini3 smartphone for China and Brazil only:

"Our strategy is a carrier-centric strategy. We've had relationships with China Mobile, where we've sold a lot of 3G-enabled Netbooks." He said that both Brazil and China were large opportunities for Dell, but he avoided a question about whether that phone would be coming to the U.S. or other markets soon.

On Netbooks: They're "one of the more challenging segments in terms of cost position." Gladden said they'll mostly be making deals with carriers going forward. And in general, low-end notebooks are "driving the competitive dynamics right now" in the PC industry because of rapidly dropping prices.

Dell shares were down about 6 percent to $14.93 in after-hours trading.

This post was last updated at 3 p.m. PT with comments from Michael Dell.

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About the author

Erica Ogg is a CNET News reporter who covers Apple, HP, Dell, and other PC makers, as well as the consumer electronics industry. She's also one of the hosts of CNET News' Daily Podcast. In her non-work life, she's a history geek, a loyal Dodgers fan, and a mac-and-cheese connoisseur.

 

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