Dell penny pinches as profits plummet

A penny saved: Dell drove down expenses more than $100m sequentially

PC behemoth Dell lauded the success of a $300m (£185m) cost-cutting drive despite seeing profits more than halve during its first fiscal quarter.

Revenue for the three months to 1 May was down 23 per cent year on year to $12.3bn while net profit slumped 63 per cent to $290m. Public sector and consumer sales declined 11 and 16 per cent respectively but SME and enterprise revenues both plummeted by 30 per cent.

Each of the four units accounted for between 23 and 27 per cent of total worldwide revenue. Dell claims operating expenses were down $101m sequentially and $312m year on year.

The vendor claims the market is giving mixed messages but that it is " positioning itself for improvement in IT spending". Chief executive Michael Dell added: "We are continuing to transform the company on the cost side and delivering strong cash flow. Re-establishing cost leadership and having flexibility to invest in our business will position us well as IT spending improves.

“Signals about the demand environment are mixed, but we are preparing for what we believe will be a powerful replacement cycle, with virtualisation and managed services playing larger roles in what customers want and Dell provides.”

Chief financial officer Brian Gladden said: “Along with generating strong cash flow, we maintained solid operating margins and made further progress towards reducing annualised costs by $4bn by the end of fiscal year 2011.”