Netbooks Compliment Notebook Sales, Michael Dell Says; Company Favors Profits Over Growth

November 20, 2008
Michael Dell using virtualization to spark commercial sales

Michael Dell using virtualization to spark commercial sales

Increasingly popular netbooks – low-cost notebooks – don’t appear to be stealing sales from more expensive, higher performance laptops, said Dell CEO Michael Dell.

“It appears to us this is mostly a complimentary category,” Dell said on an earnings conference call Thursday. “We (are) diving into that in a big way.”

Netbooks have been among the fastest growing segments of the PC market in the past quarter, especially in the emerging markets where consumers have less to spend.

Dell also said his company is focused on fielding products with good margins instead of cutting prices to gain market share.

“Given the choice between profits and growth, we’re going to go for the profits,” he said. “The first priority for us it so retain solid profitability for the company” in today’s tough economic climate.

Dell added that he expected to include more virtualization software in his server and storage lines to spark growth among commercial customers.


Dell Cuts Its Way To Better Profitability; Sees Continued Sales Weakeness, Institutes Hiring Freeze, Is Less Bullish Than H-P

November 20, 2008

Fighting the tide of a slowing economy, Dell cut 2,200 jobs, trimmed costs and transferred production to contract manufacturers to post improved third-quarter margins and earnings per share Thursday.

Dell cutting manufacturing costs

Dell cutting manufacturing costs

The Round Rock, Texas, computer maker said it anticipates continued weak demand for the “foreseeable future” and vowed to respond with additional “aggressive” cost reductions. This includes a hiring freeze for all but key positions.

The company’s cautious earnings report contrasts noticeably with more diversified competitor Hewlett-Packard’s more upbeat financial update earlier this week.

“We expect a relatively challenging environment to continue,” said Dell Chief Financial Officer Brian Gladden on a conference call.

The company’s revenue fell 3 percent, but grew 10 percent in the consumer business it is trying to nurture, especially in stronger emerging markets overseas.

“Clearly we are making some progress” in consumer with improved products and lower costs, said CEO Michael Dell.

But overall demand deteriorated during the third quarter both in the U.S. and Europe, pressuring the company to approach costs with a hatchet.

“We’re going to be very aggressive with costs” in the fourth quarter, said Gladden. That will likely include more layoffs, he said,

Dell posted net income of $727 million that fell 5 percent, but earnings per share that rose 9 percent to 37 cents.


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