Dell Seeing Demand Stabilization, Expects Slight Sequential Revenue Growth With Modest Margin Pressure In Q2
- Company to Describe Strategic Priorities, Emphasize Enterprise Technology, at Analyst Meeting
- Targeting 5-7 Percent Sales Growth, 7-Plus Percent Operating Income Over Time, Based on Improving Global IT Spending
Dell said today year-over-year demand for its information-technology products appears to have stabilized, and that it expects to report a slight sequential revenue increase in its fiscal second-quarter 2010, which ends July 31. The company also anticipates a modest decline in Q2 gross margins, the result of higher component costs, a competitive pricing environment, and an unfavorable mix of product and business-segment demand.
Speaking in advance of a Tuesday meeting in Austin with securities and industry analysts, Brian Gladden, the company’s chief financial officer, said that while demand for Dell’s products and services seems to have stabilized, it varies significantly by customer segment and geography.
He added that Dell remains focused on optimizing liquidity, profitability and growth in the midst of a still-challenging operating environment, and is on course to reduce annual costs by more than $4 billion by the end of fiscal 2011. Reductions are coming from a combination of greater efficiencies in design and procurement, optimization of manufacturing and supply chain logistics, and ongoing reductions in operating expenses.
The company stated that, over a longer time horizon, it will be targeting 5 to 7 percent compounded annual sales growth, operating income at or above 7 percent of revenue, and cash flow from operations exceeding net income. However, such results are dependent on broad global economic improvement accompanied by higher worldwide IT spending, including a sustained double-digit growth rate in demand for computer systems.
“We continue to believe that customers are deferring IT purchases, and that we will see demand return to more typical levels at some point,” Mr. Gladden said. “In the meantime, we continue focusing our energy and resources on the operating initiatives that will improve the company, and position us for future success.
“One of our strengths is understanding customer needs and meeting them with great technology and services. To do that best we’re investing to expand on existing capabilities and extend into new areas, while smartly and efficiently managing our costs and assets.”
Tuesday’s meeting begins at 8 a.m. CDT and will be Webcast live and archived at www.Dell.com\investor.
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