Dell Reports Drop in First-Quarter Revenue

Dell reports that its fiscal 2010 first-quarter revenue declined 8 percent sequentially from the fourth quarter and dropped 23 percent from the previous year. However, the desktop and notebook maker emphasizes that it still generated strong cash flow and reduced expenses during the quarter. Dell officials decline to discuss whether layoffs are possible as a result of declining revenue.

For the first quarter of fiscal year 2010, Dell has reported net revenue of $12.3 billion, down 23 percent from the previous year and sequentially down 8 percent from the fourth quarter.

Net income for the first quarter was $290 million, a drop of 784 million from the same quarter of the previous fiscal year.

"In what is still a challenging IT demand environment, we executed well on the key elements of our strategy that we're focused on," Dell Chief Financial Officer Brian Gladden said in an announcement of the numbers. "We kept our focus this quarter on the elements of our business and the strategy that we felt we could control, namely delivering great technology, service and value to our customers, and continuing to drive toward the leading cost position and driving disciplined, working capital management."

Gladden emphasized Dell's strong cash flow of $761 million and reduction of operating expenses, which were down by more than $300 million. Dell's gross margin was 17.6 percent for the quarter-or 18.1 percent, excluding the impact of expenses incurred to improve organizational effectiveness, according to Gladden.

"While there's more to do to fully reposition us on the cost side, we continue to reduce our operating expenses across the board as well. Operating expenses were down 15 percent and were 14.2 percent as a percent of revenue. In Q1 alone we cut operating expenses $101 million and reduced them $312 million from last year," Gladden said.

When asked about "head count" at Dell, Gladden responded, "We're not going to release head count information during the course of the year. We're focused on taking cost out, not on head count."

Under the category of "Consolidated Operating Income," however, severance and facilities closure expenses were estimated at $185 million, up from $134 million the previous quarter and $106 in the same quarter of the previous fiscal year.

In a change of protocol, Dell now reports its revenue and operating income in four global customer segments: Large Enterprise, Public, SMB (Small and Medium Business) and Consumer.

No segment significantly outperformed the others, although the Large Enterprise segment performed the most strongly, contributing 27 percent of Dell's net revenue, followed by Public with 26 percent, SMB with 24 percent and Consumer with 23 percent.

As for Dell's offerings, the Mobility segment accounted for 32 percent of Dell's net revenue, and other top earners were Desktop PCs, contributing 26 percent, and Software and Peripherals with 18 percent.

"We hope during the second half of the year we [will] start to see some improvement, and into the next fiscal year, even more," Gladden said.