Costs confound beleaguered Dell, likely weighing on shares and delaying its turnaround
Friday, November 30, 2007 - 08:55 AM EST"Disappointment with Dell isn't over yet. The world's second-largest computer manufacturer posted fiscal third-quarter sales results that exceeded Wall Street expectations, but its profit performance and outlook for coming quarters left investors dismayed. Shares tumbled about 10%, to $25.25, in extended trading on Nov. 29, after the results were released," Louise Lee reports for BusinessWeek.
"Dell's expenses are 'still considerably higher than we want,' Chief Financial Officer Don Carty said during the company's first conference call with analysts in a year," Lee reports. "The results suggest a long-running turnaround attempt at the Round Rock (Tex.) company may be proceeding more slowly than Wall Street anticipated. The company is struggling to emerge from almost two years of slowing growth and slipping market share."
"Brent Bracelin, analyst at Pacific Crest Securities [says], 'It doesn't look like the company has trimmed enough fat,'" Lee reports. "Earlier this year, Dell said it wants to reduce its workforce by about 10%, but as of Nov. 2, Dell had cut only about 2.5% of the 84,000 employees it had on Aug. 3. Carty insisted, though, that the company 'is still driving to that [10% reduction] number.' Carty added: 'We've identified a considerable amount of low-value work.'"
MacDailyNews Take: Yeah, like everybody at the entire company. At least Mikey doesn't have to worry about eliminating world-class industrial designers.
Lee continues, "Gross margin performance, too, didn't meet some analysts' expectations. Gross margin inched up to 18.5% of revenue, from 16.6% a year ago, but still fell below the 19% analysts were projecting. The company blamed component costs, saying they didn't decline as steeply as the company was projecting. Shaw Wu, analyst at American Technology Research, questions why that's the case, when some of Dell's main competitors, including HP and Apple have recently enjoyed the benefits of low component costs."
Full article here.
iSupply reports, "Dell underperformed the market with meager growth of 1.5 percent."
"Company market share fell to 14.6 percent in the third quarter, down from 16.3 percent a year earlier. Dell posted the weakest growth among the Top-5 PC OEMs during the third quarter," iSupply reports.
Full article here.
MacDailyNews Take: Why waste your money on an OS-limited, ugly, wedge-shaped Dell laptop or some ridiculous, neon-festooned Dell tower, when you can get an OS-unlimited Apple Mac portable, tower, or all-in-one crafted by world-class industrial designers?
The solution is, of course, obvious for Michael Dell: Shut it down and give the money back to the shareholders.

It's interesting, as bad as Dell seems to be doing in the media...we just ordered a kajillion dollars worth of new Dells for 2008.
The government and Dell must have some kind of good deal going on.