Dell Revenue Flatlines

Computer manufacturer Dell showed zero growth from fiscal year 2008 to 2009 as its sales fell off a cliff in the fourth quarter. A 3 percent drop in revenue in the third quarter of 2009 precipitated a 16 percent drop in the fourth quarter that decimated the progress the computer manufacturer made in the first half of the year.

Dell's fourth-quarter revenue was down across nearly all business segments and geographies. Sales for its Americas Commercial business dropped 17 percent to $6 billion, as demand was down among small, midsize and its largest corporate customers. The one bright spot for the company was its Global Consumer business, which grew market share to nearly 9 percent. However, its revenue still declined by 7 percent to $3 billion compared with the year-ago quarter, as customers chose lower-cost notebooks and desktops, the company said.

Revenue for the fourth quarter ended Jan. 30 was $13.4 billion, down 16 percent from $15.9 billion in the year-ago quarter. Earnings for the quarter were $351 million, or 18 cents per share, down 48 percent from earnings of $679 million, or $2 per share, a year ago.

Dell's fiscal 2009 revenue was $61.10 billion, showing no growth from fiscal 2008 sales of $61.13. Full-year earnings were $478 million, or $1.25 per share, down 16 percent from earnings of $2.95 billion, or $1.31 per share, for the prior year.

For 2009, revenue in the Americas Commercial was $28.6 billion, down 5 percent compared with 2008. The Global Consumer segment increased shipments 18 percent year-over-year and full-year revenue hit $11.5 billion, up 11 percent year over year.

Most of the computer manufacturer's business-focused sales segments were hit hard in the fourth quarter, resulting in a drop in year-over-year sales. In the fourth quarter, Dell's Commercial business saw a 22 percent drop in notebook unit shipments; 21 percent drop in desktop shipments; and 18 percent drop in server shipments. Shipments of its mobility products were flat, with revenue down 17 percent because of low global demand.

Consumer products, Dell's single bright spot, came it at $3 billion in sales for the fourth quarter, down 7 percent from the fourth quarter of 2008. However, revenue hit $11.5 billion for 2009, up 11 percent from 2008. Consumer notebook shipments led the charge for the manufacturer, up 43 percent in 2009. Shipments of desktop units, however, declined 18 percent year over year.

The computer manufacturer plans to move forward by extending its cost-cutting program first announced in March 2008. Original plans included slashing $3 billion in operational costs by the end of fiscal year 2011, but Dell has amended that strategy and plans to slash an additional $1 billion from operational costs.

In addition, Dell plans to boost product margins by stripping the cost out of manufacturing. At the same time, Dell plans to push into higher-margin, solution-oriented services that create recurring revenue streams.

"Dell has driven the cost of hardware down over the past 25 years," Michael Dell, CEO and chairman, said during a conference call. "For every dollar of margin we see on hardware, we see three to four [on services]. That's where we're heading for future opportunities."