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Dell struggled to dispel Wall Street concerns about its performance on Thursday despite reporting quarterly figures that showed underlying sales growth and earnings broadly in line with forecasts.
In a watershed moment for one of the most successful technology companies of the past two decades, Dell forecast that the current quarter would be the first period of below double digit revenue growth since the technology collapse at the turn of the decade.
Meanwhile, Kevin Rollins, chief executive, said Dell had instigated special measures to reverse a deterioration in its customer service levels.
“As a management team, we deem this unacceptable,” he said. Steps included an increase in the number of customer support staff, simpler navigation on the company’s website and more production plants, he added.
Dell’s financial performance in its previous two quarters had fallen short of expectations as it struggled with weaknesses in its widely-admired business model. On Thursday, Mr Rollins said the company had fixed some of the management issues it had faced, though it still had further to go.
Dell executives faced a barrage of questions from analysts over whether the company’s slowing growth rate and declining profit margins indicated that it was facing a long-term shift in its business model. By selling direct to customers over the internet and building computers to order, Dell has been able to sustain profit margins consistently higher than other PC makers.
Responding to suggestions that Dell no longer appeared to be growing faster than rivals such as Hewlett-Packard, Mr Rollins said: “It doesn’t seem like we’re in the pack at all. We intend to grow, we intend to grow and take share, as we have historically.” Sales are likely to expand by between 6-9 per cent in the latest quarter, the company indicated.
Mr Rollins added that the company was examining whether changing conditions in the PC and server markets pointed to longer term changes in the company’s financial model, and that it would give more details at an analysts’ meeting in April.
One-off factors helped to lift the reported revenues and earnings above its own and Wall Street estimates in the final quarter of last fiscal year, Dell said. With a higher proportion of earnings than expected coming from lower-tax countries outside the US, the tax charge in the latest quarter was 1 cent a share lower than forecast, Dell said. It also attributed 2-3 percentage points of its growth rate to an unexpected increase in sales due to the fact that the latest fiscal quarter was one week longer than the same period a year before.
Revenues rose 13 per cent during the quarter, to $15.2bn, while net income climbed 52 per cent to $1.012bn, or 43 cents a share. Wall Street had expected earnings of 41 cents a share on revenues of $14.83bn.
Dell shares slid 4.5 per cent to $30.50 in early trading on Nasdaq.