As Dell reports a revenue dip of 16 percent in the fourth quarter, to $13.4 billion, the desktop and notebook maker is looking to cut costs and expand further into low-cost laptops and mininotebooks, aka netbooks. CEO Michael Dell says the cloud and enterprise solutions will also play a role in reviving Dell's business.
Faced with the recession and dismal fourth-quarter earnings, in which
revenue dipped 16 percent to $13.4 billion, Dell
is continuing to cut costs and explore expansion into new areas of revenue such
as low-cost laptops, also known as "netbooks."
Dell officials are engaging in a strategy of cost-cutting and building new
revenue streams to get the company back on a growth track.
In addition, Dell has been concentrating on slashing its operating expenses,
which in the fourth quarter were down $365 million year over year. The company
also raised its cost-reduction goal from $3 billion to $4 billion by fiscal
2011, potentially opening the door to layoffs.
The company has declined to offer specific comments about any headcount
reductions, but said it is examining every cost area for cuts.
"We continue to look across our entire structure," Dell Chief
Financial Officer Brian Gladden said during an earnings call, for opportunities
to "streamline and improve" the company's competitiveness.
Nonetheless, Gladden took pains during the earnings call to assure listeners
that the company continued to possess a competitive mindset: The possibility of
acquiring smaller companies remains on the table, thanks to continued cash-flow
performance that leaves Dell with around $9 billion on hand.
"We'll be opportunistic; we have the cash to do that," Gladden
Gladden added that low-cost laptops and mininotebooks, or netbooks, will be
"an area we'll continue to focus on." Netbooks have seen
increasing sales as cash-strapped consumers and businesses turn to less
expensive computing solutions, perhaps taking
market share from higher-end laptops and PCs.
Rumor has it that Dell
will also expand into the smartphone arena.
In a separate call, CEO Michael Dell
touched on several key areas of potential future competitiveness for the
company, including "the cloud and the Internet, leveraging Dell.com"
and "pushing deeper into enterprise solutions" with a focus on
lowering IT costs for organizations.
Some analysts, however, are convinced that Dell's exposure to the overall PC
market will continue to be a drag, even as it attempts to reach into new areas.
"We are not dismissing our view of Dell as a turn-around story, but
believe it will take a few quarters for Dell to see the returns from its
strategic overhaul and investments in the indirect channel," Dinesh Moorjani,
an analyst with Broadpoint AmTech, said in an analyst note.
Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.