Dell sees recovery signs amid drop in net income
By JESSICA MINTZ
SEATTLE — Dell Inc. said yesterday its net income fell 6 percent in the last quarter despite early signs that businesses may be starting to buy new computers again.
Consumers snapped up low-cost laptops and smaller netbooks over the holidays, pushing Dell's PC shipments up 29 percent. Those products are less lucrative, though, and Dell's revenue and profit in the consumer PC division grew much more slowly. Dell's profit margin was below expectations, and its shares fell about 5 percent in after-hours trading.
Revenue from businesses, which makes up about half of Dell's total, grew 9 percent from last year. During a conference call, Dell's chief financial officer, Brian Gladden, said many corporations were buying servers, a trend that also appeared in recent reports from Hewlett-Packard Co. and Intel Corp. But he added that companies were also starting to buy new laptops, a sign that corporate spending on technology might be coming out of its recession-induced slump.
CEO Michael Dell said some of the increase could be attributed to technology executives spending what was left of their budgets for the calendar year, the so-called end-of-year "budget flush."
However, demand has remained strong in January and into the current first quarter. In part, Dell credited the arrival of Microsoft Corp.'s newest computer operating system, Windows 7.
Many companies skipped Microsoft's last update, Windows Vista. Then, the recession caused those companies to hold on to aging computers longer than usual, and they can't wait much longer to upgrade.
Dell did not provide guidance for the current first quarter, but Gladden said the company is cautiously optimistic that corporate demand for its products will continue.
For the three months ended Jan. 29, Dell said earnings slipped to $334 million, or 17 cents per share. That was down from $351 million, or 18 cents per share, a year ago.
Dell shares fell 73 cents, 5.1 percent, to $13.70 in after-hours trading. Before the earnings report they gained 2 percent to close regular trading at $14.39.