Filed under: Earnings reports, Management, Dell (DELL)
As Doug McIntyre mentioned last week, Dell, Inc. (NASDAQ: DELL) didn’t hit its most recent quarterly numbers amid continuing higher costs during the quarter. The company “has a lot more work to do” — so much that it seems the one golden boy of cost control is out of sorts with itself. Founder and CEO Michael Dell did say that “we won’t grow at all costs” during the conference call. This was directed at the analysts’ mosh-pit that expects growth over every other metric. Because, you know, profits are secondary.
Although its retail effort seems to be going well, Dell fights for shelf space and sales with all of its largest competitors at almost every retailer. Entering into retail was not some kind of exclusivity magic shell-game for the computer maker. It has to work long-term, and it hasn’t even been a year since Dell entered retail. The company indeed made moves towards “transforming itself” during the quarter (read: cutting costs). But can it continue to expand its business in the U.S. and overseas without washing itself in red ink at the same time? That’s the delicate challenge. Unfortunately, top competitor Hewlett-Packard Co. (NYSE: HPQ) is the strongest it’s been in over a decade behind CEO Mark Hurd.
Dell went on to say that “improvements in profitability will take some time,” and it will continue to lower headcount to reduce overall costs in addition to designing market-leading notebook PCs for consumers. Both strategies are paying off: one on the costs side and one on the revenue side. Then again, another huge challenge is increasing sales outside the U.S., where Hewlett-Packard currently enjoys roughly two-thirds of its sales. As such, a downturn in any particular market insulates HP from sagging results with the breadth of global sales it has. If Dell can also achieve that level of padding, any consumer downturn that could happen this summer won’t hurt nearly as much.
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