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Dell profits fall 33 per cent due to poor consumer sales

Needs to sell more servers quickly
Wed May 23 2012, 15:59
A Dell logo

TIN BOX FLOGGER Dell has revealed that it suffered a terrible start to its 2013 financial year, with profits falling 33 per cent to $635m.

Dell, which has been making a big push to become an enterprise server vendor in the past few years, announced that its revenues fell by four per cent to $14.4bn in the first quarter of its 2013 financial year. Its falling revenue was the most positive thing in its financial results, because its profits fell by 33 per cent to $635m.

Not only did Dell post a thumping decrease in profits, revenue from its traditional bread and butter consumer sales fell by 12 per cent to $3bn with operating profit of just $32m. Worse still for the firm were its EMEA and Americas revenue figures, where Dell saw revenue declines of one and seven per cent, respectively.

Even Dell's push into large enterprises, the firms that place orders worth tens of millions, has been checked somewhat, with the firm citing a three per cent decline in revenue in this area to $4.4bn. However its enterprise solutions and services department did its bit, showing a 17 per cent increase in revenue due to server and networking equipment sales.

Dell's poor performance in the consumer market was highlighted by its CFO Brian Gladden, who talked about how its enterprise business is a big part of its overall business strategy, saying, "Our enterprise solutions and services businesses now account for 50 percent of our gross margin, and we'll continue to make the necessary investments to maintain our progress."

Chairman and CEO Michael Dell continued on this line, saying, "We're committed to continuing our strategy to re-shape Dell's business as an end-to-end IT provider. We saw continued progress in our first quarter with the innovative IT solutions we're providing - notably our latest Dell servers, storage, networking and services that deliver customers enhanced productivity."

He didn't even mention Dell's now barely profitable consumer division that has been the firm's cornerstone for many years.

Dell's move to the enterprise is timely. Its tin boxes simply do not command high profit margins, as rival HP knows all too well. The problem for Dell is that its consumer business seems to be falling off faster than it can pick up enterprise business, which is making its financial results look slightly shaky. µ


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