DELL Results Reflect Tough Times

Dell, Inc. (DELL) has released results for the 4th quarter of fiscal year 2009. Revenue for the quarter was 16.0% below the 4th quarter of fiscal 2008. The year-over-year revenue decline was due to weak demand across all sectors. The company reduced headcount to 78,900 in the quarter from 80,800 in the previous quarter.

Increased deferred spending had spread worldwide, significantly affecting the company’s 4th quarter. Demand fell across all regions and customer segments. By business unit, Asia-Pacific and Japan Commercial (APJ Commercial) posted revenue decline of 24.0% year-over-year on a unit shipment decline of 19.0%. Growth declined in key countries including China and India.

In the Americas, commercial revenue fell 17.0% on the basis of a 23.0% decline in units. Although Dell continued to be the No. 1 computer-systems provider in the Americas, demand was down significantly among all customers, particularly small and medium businesses and large corporate customers.

Dell did not provide guidance for the 1st quarter, but reiterated a cautious outlook. Dell believes that global IT end-user demand will continue to be uncertain and challenging. The company will maintain its focus on areas that it can control, especially those that benefit customers, including product quality, services and costs. Dell will continue to manage its mix of products and services to optimize liquidity, profitability and growth.

The company expects to absorb organizational-effectiveness expenses in the 1st quarter of fiscal 2010 at a similar level as in Q4, as it further streamlines its business to improve competitiveness. On a positive note, Dell aims to gain share in China and India. Dell’s cost initiatives should benefit its P&L over the long-term. The company raised its cost reduction target by about $4.0 billion, up from the $3.0 billion previously announced, by fiscal 2011.

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