Profits slump at Dell

19 May 2006

Profits plummeted 18pc at computer giant Dell despite the company growing revenue 6pc to US$14.2bn in the first quarter. The company, which employs 4,000 people in Ireland, also revealed that it is jettisoning its “exclusive” arrangement with Intel and will start using microprocessors from AMD.

As well as deciding to use chips from AMD in some of its high-end servers, Dell revealed that it plans to restructure its operations in a move it says will reduce costs by US$3bn this year.

Dell chief executive Kevin Rollins conceded that Dell has been facing off aggressive competition in the personal computer market.

“The competitive environment has been more intense than we had planned for or understood,” said Rollins. “Over the last year we tried to achieve both growth and increased levels of profitability, which allowed our competitors to improve their relatively low levels of profitability and accelerate their growth.

“We have now taken action to reignite our growth and reassert the unique value of our direct model. We are re-establishing our price position, investing in customer sales, service and support, building our product and technology leadership and improving our cost structure and productivity.

All of these actions will enable Dell to optimise the significant potential we have for global growth at a time when we expect our industry to undergo significant change and consolidation,” Rollins said.

Dell’s overall 6pc increase in revenues was driven chiefly by sales of desktops and mobile products. Sales of personal systems such as laptops and mobile products rose 12pc to US$3bn while sales of desktop PC sales fell 3pc to US$5.1bn.

Shipments of Dell products in Europe were up 18pc year over year. In Asia Pacific sales were up 17pc while in the Americas — which account for 44pc of Dell’s overall market — sales were up 26pc year over year.

By John Kennedy