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You are here: Home / Computing / Dell Racks Up 46 Percent Profit Bump
Dell Racks Up 46 Percent Profit Increase
Dell Racks Up 46 Percent Profit Increase
By Barry Levine / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
AUGUST
31
2007
There are some happy faces in Round Rock, Texas today. Dell, which has been going through some hard times, on Thursday posted a 46 percent jump in profit for the fiscal second quarter compared to the same time last year, with a 4.8 percent increase in revenue.

The company's preliminary financial statements showed revenue of $14.8 billion, profit of $733 million, and earnings per share of $0.32 for the period ended August 3. The figures exceeded expectations on Wall Street.

Chairman, founder, and CEO Michael Dell, who returned in January to help steer the company's turnaround, said in a statement that Dell has "made progress" and that the turnaround is still "in the early stages."

Competition, Investigation

Dell is looking to get back on top after facing stiff competition from Hewlett-Packard, IBM, and Sun Microsystems. Dell remains in first place for PCs in the U.S., but has been edged out by HP for worldwide sales.

In addition to facing stiff competition, Dell has had to weather an internal investigation that turned up details about executives manipulating financial reports. An investigation by the Securities and Exchange Commission is underway, and Dell has said it will restate more than four years of financials.

Undeterred by these issues, Dell undertook several strategic steps during the second quarter. These included the launch of the Vostro brand of notebook and desktop computers for small businesses, the introduction of the ultrathin XPS M1330 notebook, and debut of new Inspiron notebooks with eight color choices.

Retail Sales, Component Prices

Selling its products through retail channels, rather than only via the Net or phone, has been part of a turnaround plan that includes partnerships with Wal-Mart and Sam's Clubs in North and South America, Bic Camera in Japan, and Carphone Warehouse in the UK. A Dell spokesperson told the Wall Street Journal that the "retail initiative is going well, and there is much more to come world-wide."

Another factor in the profit jump was a decrease in component costs, according to the company. In addition, Dell is moving to reduce operating expenses through such efforts as layoffs and improved productivity.

All of these efforts, and the quarterly financials, are "a good start for a turnaround," said IDC analyst Doug Bell, adding that it's too early to predict the company's return to success.

He said that the good news was the result of "better than normal" strength in servers and networking, as well as "higher than expected" orders for its colored notebooks and XPS line. Bell noted that the company has gone after higher-margin products, such as the XPS line.

But he said that the bump in sales has been a "two-edge sword" because orders have become backlogged. The company needs to deal with its supply chain issues so it can handle the volume, he concluded.

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