Vulnerable to Whims of Spending

By Scott Ferguson  |  Posted 2008-05-29 Print this article Print


A company such as Dell, which mainly deals in hardware and has most of its large IT customers in the United States, is especially vulnerable to the whims of spending in North America. Other top vendors, such as Hewlett-Packard and IBM, have tried to protect their bottom lines by growing their overseas business.

In April, CEO Michael Dell announced that the company would refocus itself and move away from its older reputation as a low-cost PC maker. Part of that strategy required the company to cut costs and explore new markets outside the United States.

In its latest quarterly report, Dell seems to be moving toward that goal.

For the first time, its revenue from overseas surpassed its revenue from the United States. During the quarter, 45 percent of Dell's revenues came from America's commercial market, while 24 percent came from Europe, the Middle East and Africa, and 13 percent from Asia and Japan.

Revenue from the so-called BRIC countries-Brazil, Russia, India and China-increased 58 percent year-over-year.

Dell is also moving more toward notebooks and away from desktops to follow the industry trend toward mobility.

The company's commercial and consumer notebook revenue reached $4.9 billion, an increase of 22 percent from a year ago. Desktop revenue, on the other hand, dropped 5 percent to $4.7 billion. 

In its statement, Dell did warn that it will continue to incur costs as the company continues to restructure itself, which could mean more difficult times ahead. Dell is looking to save about $3 billion in costs by 2011 and announced it had reduced its work force head count by 7,000 employees in the last year. That number excludes employees Dell inherited from its acquisitions.

In 2007, Dell had about 83,600 employees, and now the company has approximately 73,900 workers worldwide. During a call with analysts, Michael Dell indicated that further cuts in the company's employee head count is possible in the future.



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