Dell Still Seeking Direct-Indirect Balance After Missing 4Q Estimates

Dell Inc. is still "learning exactly how to balance" its direct and indirect sales programs, CEO Michael Dell said Thursday after the Round Rock, Texas-based company missed Wall Street estimates for its fourth-quarter earnings.

Responding to an analyst's question regarding channel inventory, Dell said he couldn't offer many details because business is still ramping up.

"I can say over Thanksgiving we almost sold out and we did sell out for certain models. We're still learning exactly how to balance it perfectly, but we're pretty pleased with our progress," Dell said in a conference call with analysts.

Dell briefly mentioned the company's new Partner Direct initiative in the United States, but didn't offer any performance details other than to say that the company has 30,000 partners worldwide that accounted for $10 billion in sales in the 2008 fiscal year.

Dell earnings fell 6.4 percent in its fourth quarter and the Round Rock, Texas-based company missed Wall Street expectations, despite a 10.5 percent revenue jump.

The company earned $679 million, or 31 cents per share, in the quarter compared to $726 million or 32 cents in the year-ago quarter. Analysts had projected net income of 36 cents per share, according to Thomson Financial. Dell's sales in the quarter were $15.99 billion, compared to $14.47 billion for the same period last year. Analysts were expecting sales of $16.27 billion in the quarter.

Dell executives said a "conservative [demand] in the U.S. affected growth in several product areas." In addition, the company said higher costs and slowing demand could further affect sales and profits in the current quarter.

"We are continuing to see some conversatism in the IT industry in the U.S., especially in the financial sector. It does remain to be seen how this unfolds," said Dell CFO Don Carty.

Dell was asked whether the company's retail strategy was rolling out fast enough. While Dell is now in 10,000 stores worldwide, it still has one-eighth of Hewlett-Packard Co.'s retail presence.

Dell responded by saying, "I think the fact we've gone from zero to a million units is pretty darn fast. You will see continued announcements expanding the range of partners we have. If you also look closely, our progress to date in sales out has been concentrated in the U.S. We've announced agreements in all the leading retailers in Europe. Those are beginning to take hold and come to fruition. There are many additional ones we're working on."

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