Dell optimistic despite earnings fall

The company sees a drop in second-quarter earnings but beats Wall Street estimates as it confirms a partnership with China Mobile
Written by Larry Dignan, Contributor

Dell's second-quarter earnings were down 23 percent from the same period a year ago, but still topped Wall Street estimates.

On Thursday, the company reported earnings of $472m (£289m), or $0.24 (15p) a share, on revenue of $12.8bn (£7.8bn), down 22 percent from the same period a year ago. Wall Street was expecting earnings of $0.23 a share on revenue of $12.6bn.

The company has continued to plan its efforts around an enterprise refresh cycle in 2010, and it said it sees ongoing signs of stabilisation.

As for its outlook, Dell said it expected "seasonal demand improvements from the consumer and US federal government businesses", but noted the fiscal third quarter is typically slow for enterprise customers.

In a statement, the company said: "Dell believes a refresh cycle in commercial accounts is more likely to occur in 2010, with IT spending improving first in the US. The company continues to see pressure in the form of component costs and areas of aggressive pricing in the near term, and continues to take actions to offset these items."

In other news, Dell chief financial officer Brian Gladden confirmed the company is working with China Mobile "on a small-screen device" during a conference call with analysts. However, he noted that Dell will primarily be focused on the enterprise.

Chief executive Michael Dell added that enterprise demand had improved in July and that trend continued this month. He reiterated that the company would remain focused on the next-generation datacentre. In added, "we see a pretty powerful new product cycle", fueled by Intel's Nehalem chip, Microsoft's Windows 7 operating system and technologies such as virtualisation.

An analyst challenged Dell on his contention that chief information officers would refresh their PCs. Dell said the age of the PC-installed base was old enough to be "onerous" in terms of costs, because most rely on an eight-year-old operating system — Windows XP.

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