Dell said gross and operating income margins were positively affected by a favorable decline in component costs. The company also said “a focus on more richly configured customer solutions and a better mix of products and services yielded significantly higher average selling prices and a better balance of profitability and revenue growth.” In the quarter, Dell had $46 million or two cents a share in costs related to the company’s ongoing accounting and financial reporting investigations.
“The company took deliberate actions to concentrate on solutions sales, realign pricing and drive a better mix of products and services in the quarter,” the company said in a statement. “While these actions slowed overall unit growth, a 14%year-on-year improvement in average selling prices contributed to improved gross margins, revenue growth of 3% and operating margins of 6.5%.” Dell said cash was down $200 million sequentially to $12.3 billion, driven by a reduction in accounts payable levels and a more linear level of business activity in the quarter.
“Going forward, the company believes its ability to generate cash flow on an annual basis will continue to be strong,” Dell said in a statement.
Dell did not given specific financial guidance. Instead, it said:
In the second quarter, operating margins will be under pressure sequentially as the company enters the seasonally slower quarter with elevated operating expenses and additional costs related to the ongoing investigations. In addition, results for the year could be affected by additional transformational actions, changing competitive dynamics, a more aggressive pricing environment and higher component costs in the second half of the year.
The company also said it will reduce headcount by about 10% over the next 12 months, or about 8,800 jobs..
The Street is delighted. After hours, Dell was up $1.42 at $28.33; in the regular session the stock was up 69 cents.
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