Cheap laptops damage Dell's profits

 

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By Barry Collins

Posted on 27 Feb 2009 at 10:05

Dell has reported a 48% year-on-year fall in profits as the trend towards cheap laptops hits the company's bottom line.

Although the company managed to boost the number of PCs it sold to consumers by 18%, the actual revenue generated from those sales fell by 17%, reflecting the growing demand for inexpensive laptops and netbooks.

Overall revenue was down by 16% year-on-year, with the slowdown in corporate IT spending doing further damage to the Dell coffers.

The company described the results as "solid", but admitted that there's little hope of a boost in sales in the short term. "A lot of IT spending is being deferred until there's better economic visibility," chairman and CEO Michael Dell claimed.

Dell has also ratcheted up its already aggressive cost-cutting plans, saying it will now eradicate $4 billion of costs from the business by 2011, up from its previous pledge of $3 billion.

The effect of that cost cutting has already been felt in Ireland, where Dell last month announced that it would halt production at its factory in Limerick in favour of a new plant in Poland, where labour costs are cheaper.

Dell is also attempting to buck the bargain laptop trend with the launch of several new high-end products, including a new range of Studio XPS laptops, a MacBook Air rival called Adamo and a new 24in model of its XPS One all-in-one.