Dell hopes to generate 'product lust' following mixed earnings bag

Dell hopes to generate 'product lust' following mixed earnings bag

Summary: Dell reported third quarter earnings of $766 million, or 34 cents a share, on revenue of $15.6 billion amid strong demand for notebooks.


Dell reported third quarter earnings of $766 million, or 34 cents a share, on revenue of $15.6 billion amid strong demand for notebooks. CEO Michael Dell said the PC maker is hoping to generate "product lust" with better designs to grow.

According to Thomson Financial, analysts were expecting earnings of 35 cents a share on revenue of $15.3 billion. The company took a $50 million, or two cents a share, charge for layoffs. That charge, however, was offset by a benefit due to lower tax rates. There was also a charge of a penny a share due to Dell's accounting investigation. Without those one-time items, Dell would have reported earnings of 35 cents a share.

In a statement Thursday, Michael Dell said the company is "making solid progress" on its business priorities of focusing on the consumer, emerging markets, notebooks, enterprise and SMB. As for technology spending, Dell said that there was some caution at financial services customers, but "overall demand has been good."

Dell (all resources) held its first conference call--a 90 minute strategy session--in a year. On the call, Dell laid out its current state and where it sees itself headed. Michael Dell said the company plans on being a leading consumer brand, grow abroad and simplify the enterprise IT experience.


A good chunk of time on the call was spent on Dell's consumer strategy, which the company hopes will spark growth. Dell is hoping to generate some "product lust." "We're focused on product lust across our global brands," said Dell.



By the numbers:

  • Operating income was $829 million, up 13 percent from a year ago.

  • Desktop PC revenue was $4.8 billion, down one percent from a year ago. Notebook revenue shined, up 19 percent from a year ago to $4.7 billion. Dell noted that it plans to ride the laptop momentum for years to come by cutting the time to design a product and introducing leading-edge technology. Michael Dell added that consumer notebook purchases will outpace commercial notebook sales in the near future.


  • On the enterprise side, servers and networking sales were up 8 percent to $1.6 billion. Storage sales were $600 million, up 8 percent from a year ago. Services sales gained 7 percent to $1.4 billion in the quarter. Dell is hoping power adell4.pngnd cooling will give the company an edge in the enterprise and in data centers. Steve Schuckenbrock, president of global services and CIO, said that Dell will make a big data center push by using open standards and simplifying architecture. If Dell can simplify enterprise technology with its services it can generate an annuity revenue stream. Schuckenbrock also talked up the acquisition of Everdream, which will enable customers to better manage technology assets. You can expect Dell to push the IT as a service mantra in the next year. "This will allow customers to focus on the day to day business," said Schuckenbrock.

  • Software and peripherals sales came in at $2.5 billion, up 11 percent from a year ago.
  • Revenue in the Americas was up 7 percent from a year ago. Brazil grew 45 percent for Dell. Revenue from Americas International, basically Latin America and Canada, was up 19 percent. Dell's revenue in China was up 22 percent while India sales jumped 47 percent.
  • Europe Middle East and Africa posted sales growth of 14 percent. International revenue represented 46 percent of Dell's total revenue.
  • Dell plans on buying back stock in "early December."

Overall, analysts on the call seemed concerned about Dell's plans to invest in the business and potentially raise capital spending plans. There were also questions about Dell's headcount, which hasn't come down. Donald Carty, CFO of Dell, said the company is looking to automate more roles and is examining positions in various units. Carty noted that to expand in key areas Dell will have to increase operating expenditures.

Analysts tried to nail down Dell on its commitment to lowering headcount to no avail. The company had said it would lower headcount by 10 percent a year. Carty said that goal is still there with caveats as the company tries to expand into new markets.

Meanwhile, Dell didn't provide much of an outlook much to the chagrin of analysts. Bear Stearns analyst Andy Neff asked Carty: "How will we know how you are doing?" The response more or less: Dell doesn't do guidance. Here's the company's official outlook:

The company continues to focus on strategic priorities that will provide better value to customers while driving a more optimal balance of liquidity, profitability and growth. As the company executes against these priorities it will continue to incur costs as it restructures to improve productivity and execution, reduce headcount where appropriate, and invest in infrastructure and acquisitions. These actions, which the company believes are necessary to drive long-term sustainable value, may adversely impact the company’s performance. In addition, the company’s near term results could be adversely impacted by a slower decline in component costs and a seasonal shift in mix to U.S. consumer and international regions.

Translation: Dell still has a lot of work to do.

Topics: Dell, Banking, Enterprise Software

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • His previous products made me 'product impotent'.

    What's left to say? DIY is not only cheaper, it's more effective. :)
  • Dell already generates product lust..

    ...after a while you wish you bought anything but Dell.
  • The solution is simple

    Get rid of Windows off their machines, and the lust factor increases 10 fold.

    How about working together with Sun on Indiana and get third party software vendors on board to provide good hardware and software support.

    Maybe if they provided a quality integrated product, people might actually lust after it rather than experiencing buyers regret.
    • A better idea

      If you think your idea is such a winner, do it yourself and drive Dell out of business. Oh, you don't believe the garbage you posted anymore than I do. I see...
    • What diff if hardware is junk?

      The hardware needs to run regardless of the OS. THAT is the problem! It's crap, they don't have competent people, and they don't stand behind what they sell.
      What diff if it's Linux or Windows, or Unix?
    • Nope

      I ordered Ubuntu. I had to reinstall before it would work.
      Update victim
  • transcript

    Nice writeup, Larry.

    FYI, we have a transcript of the Dell call (along with 1200+ others from this quarter):
  • I believe there was a time when Dell had this....

    Back in the day when a 286 sold for around 4 grand and Dell came
    into being. They made SOLID stuff at a real good price and they
    customers were VERY loyal even to the point of being Apple fanatic
    like. And for a time Dell held that position even as the SOLID part of
    the equation stated to wane. Sure go for design.... I alway thought
    that was a glaring weekness of Dell products anyone remember the
    Dell DJ..ha! But more important is get back to the ROCK SOLID at a
    reasonable price and with both you will have all the LUST you want
    and need.

    Pagan jim
  • Wrong products for this point in tech history

    I got a taste of Dell's emphasis on standards based computing. Reviewed a Dell Consulting proposal on implementing enterprise "best practices" and there were diagrams copied right out of Microsoft white papers. Their technical people were quite good, but the analysts were straight down the MS party line. If anyone's seen my big book of enterprise best practices, please get it back to me. I seem to have misplaced it. :-p

    Hardware is another story. Dell is not reacting well to the stratification that's going to happen in the hardware market. Not everyone in the company needs a high end machine running Vista and Office anymore. I'll bet 75% of staff level positions in most offices could effectively get by with Wal-Mart's $200.00 Linux PC. Not everyone needs a Dodge Viper to get back and forth to work when a Camry will do.

    If you look at Japan, appliances are taking a huge bite out of the desktop paradigm. That will happen here. Yet Dell and MS in particular seem to be in denial about that trend. $400 laptops, $200's for real.

    Windows is headed toward becoming a nitch os for high-end users. The commodity os will be Linux.
    • re: "The commodity os will be Linux."?

      There is no evidence of widespread desktop adoption of Linux, nor that anyone should expect that any time in the foreseeable future. The world will have to change dramatically for that to happen.

      In other words, yes, the world would be different if it was different :-/
      • The world is changing.

        Four years ago there was a big gap. OS/2 was the solid, stable OS that Microsoft claimed to be, but it was a secret outside of the finance industry. Windows had the usability, when it didn't crash, and was ubiquitous because of their anti trust violations. Linux was known only to a few outside the Geek factories.

        Now, IBM has really stopped support of OS/2 and is pushing Linux for the office. Windows has finally acquired some of the stability that they sacrificed in their quest to destroy IBM. and Linux is being sold in Walmart, or downloaded and burned to CD and then installed by booting the CD and following the on screen instructions.

        Yes, the times, they are achangin'
        Update victim
        • The world is changing -- The reality check!

          Check your facts, first. OS/2 was not a Microsoft product. It was an IBM product, and it competed against Windows. It was dubbed the "Windows Killer" by IBM, but it never made any real ground outside of some isolated institutions.

          Microsoft was never on a "quest to destroy" IBM, nor even harm it.

          For years, some folks have predicted that Linux will be the new Windows. Years. At one time, it was poised to surpass Mac OS market share, but that lead has stalled. The bitter reality, for the world of Linux, is that they're having a hard time giving it away for free! Tthe market share numbers prove that statement to be true.

          While it is true that "the times are a changin'", the world will have to become a *very* different place than it actually is for Linux to become a serious contender at the desktop level.
          • Gee Steve, check again

            OS/2 was a joint venture of IBM and Microsoft. They broke up over IBM's insistence that for stability reasons the GUI not be incorporated into the kernal. Microsoft insisted that the GUI be included in the kernal for the appearance of speed. They split the co-operative development and each retained rights to what they had developed to that point.

            IBM continued to what is now known as OS/2.

            Microsoft sold the same product, except for incorporation of the GUI into the kernal, as Microsoft Windows OS/2 - NT. The same software ran on both until Microsoft changed the file system to prevent this and dropped the "OS/2" from the name.

            During the joint development period, Bill Gates was an active promoter of OS/2 as the next great operating system.
            Update victim
  • PC product List? For real?

    PCs are commodities. Precious few PC users have "product lust" for a PC. That's reserverd for the cool stuff, like iPhones and anything Macintosh.

    PC users care about mundane things like reasonable value for the price, and DVD drives that are faster that Dell's molasses drives, or not being gouged for upgrades in which the upgrade cost (i.e., the price difference between the standard component and the upgraded component, like getting a larger disk drive) is *more* expensive that the price of buying the higher component. That could make thinking people think twice!

    I believe Dell is barking up the wrong tree by targeting such a small niche as those PC users who have "product lust" on the brain.
  • Walmart Outsold Dell

    Walmart sold cheaper computers without an OS and outsold Dell with Linux on them.

    Never understood why you have to buy a computer with an OS already on it. Most of what Dell sells are cookie cutter computers. If a customer wants a computer of any type with an 80 gig hard drive they should have that option.

    Grandma may not need a Dell Demensions Computer with a 500 Gig Hard Drive. Hell she might not even need a DVD Drive.

    Just go to Dell's Support Forum and you will see thay are all mindless idiots. Their goal is to put everyone into one of their marketing cookie cutter groups. They have no idea how to deal with an intelligent human being.
  • a "dear mike" letter

    Mike, a friend should tell you that reliability and a longer warrantee to back it might stimulate lust ..
    when a company tells me they only expect their product to run ONE year without problems i grow cold.. and when the price of their their extended warrantee tells me they expect EXPENSIVE repairs after that period i wont even "date" them..
    i was loyal enough to incur multiple major component failures in 3 dell machines within extended warrantee periods.. but now i'll look for a better "relationship".. i just dont love you anymore.
    • warrantee -> warranty

  • Lack of competent support

    I have tried to get Dell to help with getting ATI cards they sold me to work with two of their computers for the last three months. Thay can't seem to cure the problem and have even quit replying to e-mails. I have 24 Dell computers in my lab here at school. I just ordered a replacement from HP for one of them. Dell is out the door, never to return as far as I'm concerned. I may have to go back to building my own but I don't care. I'm fed up with Dell and their junkand lack of knowledgeable or timely support.
  • Do NOT listen to Wall Street.

    In the last 10 years or so all Wall Street can see is this quarter and their solution is always the same, fire people. Do NOT listen to it, the company met expectations and that is good enough. Keep the people you have trained and use them to grow the business and look at the next year or two, not just this quarter.
    • Can I get an "AMEN"

      You know it was sort of cute back in the 80's where everyone and their mother
      jumped on the stock market to make their millions. That is until you relized what
      was happening to the country as a whole. Perfectly good sound businesses were
      being swept up and gutted in the name of the quick buck and people lost good
      solid jobs to make stock holders rich quick. Well of course in this day and age
      people who get it NOW are slow to learn their leasons and it's continued through
      the 90 right up too now. I want too be rich no matter what the cost to my own
      country. Sort of like I want to be cofortable no matter what the cost to the

      Well congrats my fellow Americans we've managed to do what a couople Word
      Wars and a Great Depression had been unable to do. We've knocked a once great
      country onto it's back side and we have no one to blame but ourselves. Not the
      Chinese (though they will be at the table to divide the spoils) Not the Russians
      however they too will be at said table. Not the Iranians or the jihadists though
      they did play their part in giving us something to keep our head off the real issues
      confronting us...something simple easy to understand a bad guy whom we've
      thrown BILLIONS maybe even TRILLIONS at instead of spending said monies to
      make us energy independant, on our infrastructure, on anything that might move
      us forward. Nope it wasn't any of them..... It was us and only us.

      Pagan jim