Dell Sees Some Financial Improvement in Fiscal Q2

Published: September 4, 2007

by Timothy Prickett Morgan

Michael Dell and the server and PC company that bears his name are not out of the financial woods yet, but the wolves are not nipping at the heels like they were a few months ago. Dell's investigation by the Securities and Exchange Commission is done and Dell has had to restate financials for a bunch of years. And restructurings initiated to try to turn the company around seem to be taking hold, if Dell's fiscal second quarter financial results are any guide.

Last week, just as everyone in America was heading out of town for the Labor Day holiday, Dell issued preliminary financial results for the second quarter of fiscal 2008 ended August 3. Dell's sales for the quarter came to $14.8 billion, up 7 percent, boosted by server sales and notebook PC sales. Net earnings in the quarter rose by 15 percent to $733 million. Dell was impacted to the tune of $109 million in adjustments for expired stock-based compensation and another $59 million related to the SEC's accounting investigation. Dell has yet to file its 10Q reports for fiscal 2008 and has not yet restated its results. Dell said on August 16 that it expects to shave anywhere from $50 million to $150 million out of the more than $12 billion in net income over the four year timeframe of the restatement period. These restatements have to do with unspecified revenue recognition practices and are not due to back-dating of stock option grants.

Dell said that server and networking sales in the quarter came to $1.6 billion, up 14 percent, with storage accounting for $600 million, up 20 percent. Mobile PCs brought in $3.9 billion, up 5 percent, while desktop PCs accounted for $5 billion, up 2 percent. Software and peripherals brought in another $2.4 billion in the second quarter of fiscal 2008, up 9 percent, and services came to $1.3 billion, down 7 percent.

"We continue to invest in company initiatives that align our products and services around customers' needs in order to drive long-term, sustainable performance and extend our position as a trusted technology partner," said chairman and chief executive officer Dell in a statement. "While our results demonstrate we've made progress against our goals, we are still in the early stages of transforming our company's structure, costs and operations."

Dell said that it was cutting 10 percent of its workforce back in June, and it has yet to finish this work.

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