Update: Dell revenue up though U.S. consumer business falls

Dell experienced a drop in its U.S. consumer business, but managed to record revenue growth for the third quarter boosted by an increase in global notebook sales.

The company reported net income of $766 million or $0.34 per share, for the third quarter of 2008, compared to net income of $601 million for the same quarter a year earlier. Earnings fell short of estimates made by Thomson Financial analysts, who projected net income of $785.71 million and $0.38 earnings per share. The earnings are based on a non-GAAP (generally accepted accounting principles) basis.

Dell recorded third-quarter revenue of $15.65 billion for the quarter ending Nov. 2, a 9 percent year-over-year increase.

The company incurred a $50 million charge related to employee reduction and asset disposals, the company said.

There could be a reduction in headcount in the future as the company looks to make its business more efficient, said Don Carty, CFO, on a conference call. The company has an opportunity to automate some tasks and cut employees that do similar work, Carty said.

On May 31, the company promised to reduce headcount by 10 percent, but it has failed to do so, instead focusing on acquiring businesses, Carty acknowledged.

“We feel we’re making progress, but we’re going through transformation,” Carty said.

Revenue for Dell’s U.S. consumer business declined 6 percent, while revenue from mobility products, including notebooks, increased 19 percent globally, Dell said in a statement. Revenue from notebooks continues to increase as desktop revenues decline, Dell said.

Emerging economies are a big part of the company’s future, Dell said. Revenue in Brazil, Russia, India, and China combined grew 32 percent, CEO Michael Dell said during the conference call.

The company is especially focused on growth in China. “We intend to have a presence across 1,000 cities in China, opposed to 45 cities we have a presence in today,” Dell said.

Dell will improve its consumer PC supply chain by adding distributors globally, Dell said.

The company recently completed an internal accounting investigation and restated its financial results from fiscal 2003 to the first quarter of 2007, bringing it into compliance with listing requirements specified by the Nasdaq stock exchange.

Dell is in the process of restructuring after an accounting scandal, personnel changes and slow growth in the U.S. PC market. It is also battling Hewlett-Packard, which is closing in on Dell’s position as the leading U.S. PC vendor, according to surveys.

Michael Dell admitted the company had lost its customer focus when he returned as CEO in an effort to revive the company after Kevin Rollins resigned. The company has since launched new distribution channels for consumer PCs and released new hardware, services, and tools to ease management and reduce costs of maintaining IT systems for enterprises.

Through its supply chain, Dell will be able to combine hardware, software, and services in one package to customers, Dell said. The strategy of helping customers simplify IT is part of a new business model to generate sustained returns, he said.

It released a new line of PowerEdge servers to expand its presence in datacenters and recently signed a deal with Sun Microsystems to distribute the Solaris OS on its PCs. It also signed a deal Google to sell its search appliances.

Dell this month also agreed to acquire SAN (storage area network) vendor EqualLogic for $1.4 billion, and desktop services management company Everdream for an undisclosed amount.

The acquisitions are in line with the company’s new strategy to provide a range of hardware and IT services to users, Dell said.

This story was updated on November 29, 2007