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Dell Seeks Growth as Shipments Decline

Dell continues to play catch-up with its rivals, announcing profits dropped 5 percent during its most recent quarter. However, revenues climbed to $14.9 billion, an increase of 11 percent over the same period a year ago, the company said Thursday.

For the year ended Jan. 29, Dell's profits declined 42 percent, while revenues were down 13 percent, totaling $61 billion.

Though its quarterly earnings were better than expected, Dell continues to struggle at a time when other key IT suppliers are reporting improved results. Dell's largest rival, Hewlett-Packard, reported on Wednesday a 25 percent increase in profits for the quarter and an 8 percent increase in revenues.

Dell blamed its poor quarter on the higher cost of supplies such as DRAM and overall tightening in capacity by suppliers.

The company's SMB and enterprise business were hardest hit by last year's overall decline in IT spending, said Dell CFO Brian Gladden, speaking on Thursday's earnings call. "These businesses were hit the hardest by the slowdown in the economy," Gladden said. Overall, Dell shipped 5 million fewer units last year, he added.

Founder and CEO Michael Dell said the company is taking several steps to grow revenues and profits this year.

"You will...see us further reducing our product complexity, simplifying our supply chain and providing our customers with choices and value while improving profitability in the process and significantly enhancing our online capability with Dell.com and related online properties to improve customer experience, build loyalty and raise margins," Dell said.

Among other things, Dell said the company is looking to make further acquisitions. He pointed to the company's acquisition of Perot Systems last year, which helped boost Dell's services revenues by 51 percent quarter-over-quarter, as well as its agreement last week to acquire Kace Networks, a provider of systems management software.

"You will also see us continue to make inorganic investments adding new capability," Dell said.

One bright spot was Dell's servers and networking business, which was up 26 percent. Also, though desktop PC revenues declined 3 percent year-over-year, sales increased 14 percent sequentially. Mobile system sales increased 16 percent year-over-year and 11 percent sequentially.

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.

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