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Dell struggles to flog boxes to consumers

Relies on enterprise sales
Fri Aug 20 2010, 14:35

TIN BOX FLOGGER Dell had to rely on enterprise sales to post profits as its consumer business posted a loss.

On the surface Dell managed to release a good set of second quarter financial results, bringing in $15.5 billion with $872 million operating income, however not everything was sweetness and light for the firm. Even though $2.9 billion of that came from its consumer business, the company said that after costs were taken into account it ended up with a $21 million loss.

The firm played down questions that it didn't take the consumer business seriously, saying that consumer sales still represent 19 per cent of its total business, meaning it was worth spending some effort on. The disappointing figures were attributed to high component costs, though Dell said it was taking steps to improve profitability in its consumer business. It also said that the usually lucrative 'back to school' period was a little weaker than it had expected.

Typically firms such as Dell and HP purchase vast amounts of components ahead of time, betting on the cost either rising or falling. Dell said that in the coming months prices of hard drives, memory and LCD panels are set to fall, though when asked if its hedged bets had paid off, Dell was careful to temper any enthusiasm, all but inferring that it had placed its strategic buys just before component prices had fallen.

Dell CEO Michael Dell said that 2011 will be a "big tablet year", though he did not mention if the outfit has plans to release any more devices. When queried about Intel's purchase of McAfee and whether it would change his firm's dealings with either vendor, Dell seemingly was as surprised and shocked as everyone else, saying that he needed time to "understand the deal a bit more" and that it was "too early to speculate" whether it would change any business relationships.

Though Dell did exceedingly well in the enterprise market, its lacklustre performance in the consumer market is clearly a problem. With increased competition, especially from Apple and Acer in this market, Dell has a lot of work to do if it wants to decrease its reliance on the enterprise to bolster its revenues. µ



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