Bad times keep rolling for Dell

 

Gallery

Posted on 18 Aug 2006 at 13:26

Just a few days after recalling more than four million fire-hazard laptop batteries, Dell has announced results that show profits have fallen by more than half.

The computer giant released its second quarter results for the period ending August 4 yesterday. Profits slumped to $502 million, which is 51 per cent lower than this time last year.

Even a rise in sales of five per cent could not bolster the outlook as this was still below analyst expectations. Last month, the computer giant was forced to issue a profit warning, alluding to less than glorious results, claiming that it had been hit hard by aggressive pricing.

The company also revealed that it is currently under an informal investigation by the Securities and Exchange Commission (SEC) who wants to take a closer look at its books. Dell said it has launched its own internal inspection into the situation but does not believe it will affect its historical financial standing.

Dell openly admitted disappointment at the bleak results, but vowed to take action to improve the situation by enhancing technical support, slashing prices and reducing overheads. This action includes a $50 million cash injection into enhancing the customer experience.

'While we are disappointed with the results for the quarter, we are taking the necessary actions to correct missteps and improve our results for the long term,' said Dell's chief executive Kevin Rollins.

'Our response is to increase our investment in the customer experience throughout the world and continue this positive momentum to create the best experience for all of our customers. This is a top priority for us for the long term.'

Despite grim financial times, Dell has remained upbeat about its future and its operating model. The company plans to deliver a greatly-expanded product line in the second half of the year, bolstered in part by plans to build on its existing relationship with AMD.

Next month will see the emergence of Dimension desktop computers with AMD processors, followed by two-socket and multi-processor server using AMD Opteron processors by the end of the year.

'The direct model remains a powerful differentiator for our global business, providing a unique relationship with our customers and a clear cost advantage over our competitors, 'Rollins told shareholders at Dell's annual meeting last month.

Author: Maggie Holland,