The company also posted slightly higher revenue from a year earlier as an increase in average selling prices and a fall in component costs helped offset stiff competition. Dell has been in Ireland since 1990 and is Ireland’s biggest exporter. It located its EMEA (Europe, Middle East, Africa) manufacturing plant in Limerick a year after chipmaker Intel’s decision to site a major plant in Ireland.
Dell Ireland is the 2nd largest ICT employer in Ireland (after chipmaker Intel) with over 4,300 currently employed between Dublin and Limerick. Dell’s importance to the Irish economy is evidenced by the company’s contribution of at least 5.5% of Irish exports, 2% of GDP and over 4% of all expenditure in the Irish economy. In the financial year ended 30th January 2004, Dell paid €160 million in salaries in Ireland. For the financial year ended 30th January 2005, Dell paid €55 million in Corporation Tax. Shares rose in after-hours trading, up 7% to $28.78. The stock had closed at $26.91, up 67 cents on the Nasdaq Stock Market Thursday.
Dell job cuts will involve about 8,800 jobs positions. Dell’s sales and profits began to slow since 2005 as more people switched from the direct sales model to retail stores. Rival HP sells PCs through 110,000 retail outlets world-wide.
Last week, Dell announced it plans to sell its personal computers through Wal-Mart Stores Inc. Dell also today reported preliminary results for the first quarter of fiscal year 2008, with revenue of $14.6 billion, operating income of $947 million and earnings per share of $0.34. In the quarter, gross and operating income margins were positively affected by a favorable decline in component costs. In addition, a focus on more richly configured customer solutions and a better mix of products and services yielded significantly higher average selling prices and a better balance of profitability and revenue growth.
In the quarter, the company incurred approximately $46 million, or $0.02 per share, in costs associated with the ongoing investigations into certain accounting and financial reporting matters. “Our strategic intent is to simplify information technology for our customers by removing cost and complexity,” said Chairman and CEO Michael Dell. “No other company is as well positioned to unlock value for our customers – empowering them to implement simpler and smarter technology solutions.”
End-to-end transformation
Dell claimed that its first-quarter performance demonstrates early progress the company is making in its systematic effort to restore competitiveness to the core business, re-ignite growth, and build solutions critical to customer needs. As part of this transformation, over the past two quarters Dell has:
Restructured the senior leadership team to enhance accountability, bring clarity to the company’s transformation strategy and move decision-making closer to the customer.
Improved customer satisfaction ratings through increased investment in technical support resources like Dell Support Center and DellConnect. These investments helped the company achieve a 66% decrease in the number of times customers are transferred before their issue or question is resolved.
Strengthened the foundation for renewed growth in established and emerging regions through innovative products tailored to specific customer needs such as the EC280 system introduced for China, and new manufacturing and development facilities in high-growth regions like Brazil.
Globalized the services business around a strategy of embedding supportability and serviceability into hardware, simplifying and standardizing service options and delivery, and enhancing remote monitoring and resolution capability to minimize IT infrastructure costs for customers.
Initiated a comprehensive review of costs across all processes and organizations from product development and procurement through service and support delivery with the goal to simplify structure, eliminate redundancies and better align operating expenses with the current business environment and strategic growth opportunities. As a part of this overall effort, Dell will reduce headcount by approximately 10% over the next 12 months. The reductions will vary across geographic regions, customer segments, and functions, and will reflect business considerations as well as local legal requirements. “While reductions in headcount are always difficult for a company, we know these actions are critical to our ability to deliver unprecedented value to our customers now and in the future,” Dell said.
Higher average selling prices contribute to better revenue
The company says that it took deliberate actions to concentrate on solutions sales, realign pricing and drive a better mix of products and services in the quarter. While these actions slowed overall unit growth, a 14% year-on-year improvement in average selling prices contributed to improved gross margins, revenue growth of three% and operating margins of 6.5%. Cash and marketable securities were down $200 million sequentially to $12.3 billion, driven largely by a reduction in accounts payables levels and a more linear level of business activity in the quarter. Going forward, the company believes its ability to generate cash flow on an annual basis will continue to be strong.
Focus on more richly configured customer solutions drives growth in enterprise
In the first quarter, server revenue led the enterprise with growth of 19% year on year to $1.6 billion. For Q1, Dell was again No. 1 in the United States in units shipped at 33.3%. Storage revenues were up 13% year on year to $0.5 billion. Revenue from mobility products increased 7% to $4.0 billion while desktop revenues of $4.9 billion were down 6% year on year. Enhanced services delivered $1.3 billion in revenues and software and peripherals revenue increased 6% year on year to $2.3 billion.
In both products and services, Dell will introduce new standards-based technologies, while reducing the complexity and cost involved in implementing solutions and maintaining a secure and stable infrastructure. Dell is demonstrating its renewed focus through initiatives like the recently formed Dell Data Center Solutions Division, which is delivering Dell’s Cloud Computing service and design model that allows customers to optimize their IT infrastructure based on their specific needs.
Dell is also committed to delivering innovative solutions and design to the client space by shortening product refresh cycles and delivering robust systems with the latest technologies and leading-edge industrial design. For example, the company was one of the first to introduce flash-based, solid state drives (SSD) to its portfolio as an alternative to hard disk drives on corporate notebooks. SSDs, which have no moving parts, bring a new level of reliability, performance and noise reduction to customers seeking the best in mobility performance. (finfacts.com)
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