Computer maker Dell posted disappointing sales and profit on Thursday for its fourth quarter, a sign that its turnaround efforts have yet to bear fruit.
Excluding a host of special items including acquisition and restructuring costs, Dell DELL earned 34 cents a share for the quarter, which ended Feb. 1. That's 13% above the year-ago figure but 2 cents short of the average estimate of analysts surveyed by Thomson Financial. Sales rose 10.5% to $15.99 billion, also short of views.
Dell's operating income as a percentage of sales fell to 4.9% in the fourth quarter from 5.7% a year ago.
Shares fell about 1% in after-hours trading to around 20.60.
Still, Dell executives said they were satisfied with the results.
"We were very pleased with the acceleration of our growth, particularly in notebooks and emerging markets and the consumer market," Dell Chief Financial Officer Donald Carty said in a conference call. "The good news is our performance in the fourth quarter has increased the confidence that of all of us in management and at the board have that we have the right road map to achieve our targets."
Carty said Dell's various businesses are on a "stronger footing" now, but that the company has more work to do in cutting costs.
Dell returned to double-digit sales growth last quarter for the first time in eight quarters.
But few expect it to last. Analysts see sales growth falling back into the single digits and slowing for the next three quarters.
"I'm a little concerned on the numbers front," said Rick Hanna, an analyst with Morningstar. Dell managed to boost its unit hardware sales, but that didn't translate into the same sort of revenue and earnings growth.
Rival computer maker Hewlett-Packard HPQ reported 23% unit sales growth that resulted in 24% revenue growth last quarter, he says. That compares to Dell's 19% unit growth and 10% revenue growth.
Dell's move into retail stores and its strong presence in the weaker U.S. market probably hurt its results last quarter.
"It's going to be shaky and rocky in the short term as they try to figure out a profitable model to serve a multi-channel world," Hanna said.
For the current first quarter, analysts expect Dell to post earnings per share of 35 cents, up 3%, on sales of $15.83 billion, up 8%.
It's been more than a year since Michael Dell retook the reins of the company he founded in his college dorm room in 1984. He stepped back in charge after the company's growth stalled and its reputation suffered amid reports of poor customer service and a massive notebook battery recall. It also weathered an accounting scandal that required it to restate financial results for the previous four years.
Since Michael Dell returned to lead the company on Jan. 31, 2007, he's turned the company's business model on its head.
Dell no longer sells exclusively direct to customers through online and phone sales. It now offers its products through retailers such as Wal-Mart Stores WMT, Best Buy BBY and Staples SPLS. More than 10,000 retail stores worldwide now offer Dell products.
The company also has partnered with resellers to drive sales, and it has launched a product family called Vostro targeting small businesses.
Dell has gone on an acquisition spree, buying seven privately held companies involved in areas such as software as a service, virtualization and remote systems management. They included SilverBack Technologies, ASAP Software, Zing Systems, EqualLogic, Everdream, MessageOne and the Network Storage Company.
Over the last eight months, the Round Rock, Texas, company has cut its global head count by 3,200, excluding acquisitions. As of Feb. 1, Dell employed 88,200 workers vs. 90,300 a year earlier.
Dell's sales outside the U.S. rose 16% and accounted for 49% of its total revenue in the fourth quarter. Growth was especially strong in Brazil, Russia, India and China -- the so-called BRIC countries -- where revenue rose 36% on a 50% increase in units.
Dell increased notebook computer sales by 24%, with unit shipments up 37%.
Source: Investor's Business Daily