As profits fall 5pc, Michael Dell resolves to brave economic winter

21 Nov 2008

Dell, which once pipped Hewlett-Packard to the post as top PC maker in the world, last night reported a 5pc drop in profits and a 3pc fall in revenues.

The company, which employs more than 4,000 people in Ireland, said that net income fell 5pc to US$727m in its fiscal third quarter.

Revenues at the company fell 3pc to US$15.1bn from US$15.6bn last year.

The company’s workforce in Ireland will not take any solace from the results. They have already been dealt a blow with the news that 700 contract workers at Dell’s plant in Limerick are to be made redundant.

Speculation around the future of Dell’s operations in Ireland has been rife after it emerged in recent months that the company may be looking at moving its manufacturing operations to contract manufacturers in low-cost locations in the Far East.

The one bright light in the results is that Dell is nearing the end of a year-long restructuring process, which has resulted in an 11pc reduction in operating costs.

Operating expenses were 12.1pc of revenue, an 11pc decline on a dollar basis from a year ago. The company ended the quarter with 2,200 fewer positions than in Q2, and down 9pc from one year ago.

A bullish CEO Michael Dell said he was ready to brave the current economic storm.

“Our business model adapts quickly to economic changes, even the kind of significant challenge we saw in the third quarter.”

“We increased profitability with an improved mix of products and services – more than a third of our revenue and profit now comes from servers, storage, services and software and peripherals – and benefited from initiatives to improve our competitiveness, including tight cost controls,” Dell said.

“During previous periods of economic challenge, Dell led the way in providing customers the technology they want and the value they need, and we’re doing it again. We’re simplifying IT, reducing costs and maximising productivity for customers.”

Dell said the company is continuing to focus on five growth areas: notebooks, enterprise, global consumer, small and medium business and emerging countries.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years