Dell on Thursday reported a boost in earnings and revenue in the fiscal first quarter, driven in part by strong notebook sales and higher sales in countries outside of the United States.
However, the computer maker also reported that it saw "conservatism" in IT spending in the United States, which Dell expects to last through the summer.
Contributing to Dell's profitability in the quarter was a reduction in operating expenses, led by a smaller workforce than a year ago. The company has 7,000 fewer workers than the same period a year ago, which included 3,800 job cuts in the first quarter.
While workforce reductions were across divisions, a "very substantial amount" came from Dell's consumer product unit, Donald Carty, vice chairman and CFO, told analysts during a conference call. Dell announced a year ago that it planned to gradually cut 8,900 jobs, and is targeting $3 billion in annualized reductions in spending by fiscal 2011.
Along with the reduction in spending, Dell's growth in commercial and consumer products and services outpaced the industry as a whole in the quarter, executives said, based on their own calculations. Product shipments overall rose 22% from a year ago, with notebook shipments rising 43%, or 1.2 times the industry growth rate, according to Dell. Shipments of server computers increased 21%, or three times the industry rate; and storage revenue increased 15%.
Revenue outside the United States in the quarter surpassed U.S. revenue for the first time at Dell. Brazil, Russia, India, and China led with a combined growth of 73% year over year in shipments and 58% in revenue. The countries accounted for nearly 9% of Dell's total revenue.
While the company did not give a forecast for revenues or profits, Dell said it has seen U.S. businesses pull back on technology spending. "We are seeing conservatism in IT spending in the U.S.," Carty said.
However, Michael Dell, founder, chairman, and chief executive, told analysts that he expected businesses, particularly large companies, to open the purse strings again, since it was only a matter of time before they would have to upgrade IT systems. "There's a rebound effect, so we're staying very close to our large customers," he said.
On the consumer side, Dell was preparing for September, when children and young adults head back to school. "You'll see a very active back-to-school season for Dell in notebooks," he said.
Overall revenue in the quarter rose 9% over the same period a year ago to $16 billion. Net income increased 4% to $784 million, or 38 cents a share. Dell's revenue and profits in the quarter surpassed estimates of Wall Street analysts polled by Thomson Financial.
Dell is more than halfway into a turnaround effort to reverse the mistakes that led to the company ceding the title of world's largest computer maker to Hewlett-Packard. While financial analysts believe Dell has made progress in reversing its market decline, some believe it's going to take some time, perhaps as long as two years by one estimate, to complete the turnaround.