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Dell Disappoints on 3Q Sales and Profits

Posted by: Aaron Ricadela on November 19, 2009

Dell missed even modest expectations for its fiscal third quarter ended Oct. 30, but CFO Brian Gladden pointed to a sequential rise in fourth-quarter sales helped by the launch of Windows 7.

In its Nov. 19 earnings report, Dell said sales fell 15% to $12.9 billion. Net income fell by 54% to $337 million, or 23 cents per share after excluding certain one-time items. Wall Street analysts had expected Dell to earn 28 cents a share on sales of $13.1 billion. A year ago, Dell reported earnings of $727 million, or 37 cents per share, on $15.2 billion in sales.

Shares of Dell fell by nearly 6% in extended trading after the report. At the end of regular trading Nov. 19, Dell’s stock closed down 19 cents, or 1.2%, at 15.87.

The weakness was spread across nearly all of Dell’s businesses. Sales to large businesses bore the brunt of the declines as information technology departments continue to keep a tight rein on costs. Nearly 80% of Dell’s sales are to businesses and government customers. “We are losing share in the aggregate” because of a heavy reliance on commercial sales, Gladden told reporters during a conference call after the results were announced.

Dell didn’t see much benefit from Microsoft’s launch of its new Windows 7 operating system on Oct. 22, since Dell’s quarter ended eight days later. In the two weeks leading up to the launch, customers put off PC purchases to avoid buying machines with older software running on them, Gladden said. “We built a little backlog as a result, and we’ll ship through that in the fourth quarter,” he said.

Dell’s gross profit margin came in at 17.3%, or 18.3% after excluding one-time expenses related to the closure of a plant in North Carolina. Shaw Wu, an analyst at Kaufman Bros., said he was expecting an 18.6% profit margin in a Nov. 19 research note.

Dell’s consumer sales fell by 10% during the quarter, but Gladden said Dell “walked away from some retail business during the quarter” that wasn’t acceptably profitable in order to preserve margins.

Turn back to later tonight for a full report on Dell’s third quarter, and a look at what’s ahead for the company.

Reader Comments


November 19, 2009 7:23 PM

Not getting enough Intel MDF?


November 20, 2009 12:15 AM

In the pursuit of maximizing profit, they destroyed their quality and reputation as a company with excellent customer service. It took a little while, but customers soon realized the company was a shell of its former self. Now they are reaping the consequences of their earlier choices.


November 20, 2009 11:44 AM

I stopped buying dell products when 3 years ago i was forced to deal with their customer service dept in India.I dealt with a guy named Sean ( Sean?, yeah right...nice scripted name).

They tried to charge me $39 for hardware advice & could not solve my problem. They made me dismantle my P.C. only to tell me they could not pinpoint the problem. This was, of course, after numerous nightmarish calls, where no one would return my call for days.

Well, to make a long story short, their service s@#cks and that's why Dell is in the position they are in right now.

Oh, & I did get my $39 refund after 3 months of going back & forth with people in a foriegn country.


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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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