Dell's profit falls almost 50 percent

The PC maker's earnings sink as technology spending dives worldwide. Also, fourth-quarter revenue falls 16 percent.

Updated at 1:50 p.m. PST with comments from CFO Brian Gladden.

Dell's profit sank drastically during the final quarter of 2008.

The PC maker reported fourth-quarter revenue of $13.4 billion Thursday, a 16 percent drop from $15.9 billion reported the same quarter a year ago. Dell's profit for the quarter totaled $351 million, or 18 cents per share, compared to $671 million and 31 cents per share the year before. That's nearly a 48 percent drop in profit. Analysts had been anticipating earnings per share of 26 cents.

Dell had reported last month it would be forced to take a pre-tax charge of $280 million, or 11 cents per share, related to cost-cutting and restructuring measures taken during the quarter.

The company continued to cite the "challenging" global environment and the reduction in IT spending by large corporate customers, a segment in which Dell is heavily invested.

Dell CFO Brian Gladden
Dell CFO Brian Gladden Dell

Many of the company's customers began to defer spending starting in the summer, and it "continued to deteriorate through the second half of the year," Chief Financial Officer Brian Gladden said during a conference call with reporters. "We expect continued weakness during the current quarter."

Gladden tried to keep the focus on the company's progress on cutting costs. Dell cut operating expenses by 16 percent, or $363 million, during the fourth quarter.

He also said there would be more to come. Gladden said the company will be able to take $4 billion of costs out of its budget by 2011, up from the previous goal of $3 billion announced last year. The costs will come from improving on manufacturing and supply chain costs, as well as operating expenses. When asked if that included more job cuts, Gladden didn't deny that it would. It's "not just labor, not just people," he said.

Though Dell managed to ship 18 percent more consumer PCs for the quarter, because consumers are gravitating toward cheaper notebooks and Netbooks, revenue dropped 17 percent. But the full year was actually an improvement on 2007--revenue increased 11 percent to $11.5 billion.

Dell's stock dropped 2.3 percent to $8.02 per share in after-hours trading.

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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