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Dell sees 33 percent drop in Q1 profits, says touchscreen Windows 8 products will cost more

Dell Streak 5

Dell announced disappointing Q1 results this week, posting profits that were down 33 percent from Q1 2011, along with revenues that dipped four percent over the same period. CFO Brian Gladden attributed some of the decline to today's uncertain economic climate, which has forced many companies and public sector organizations to curtail spending. Such corporate equivocation has apparently taken its toll on Dell, which earlier this year announced that it would be shifting its focus away from the consumer market, and toward enterprise.

The company's PC revenue fell by six percent overall last quarter, with consumer sales dropping by 12 percent. According to Dell, some of this decline could be explained by supply chain disruptions caused by last year's flooding in Thailand, as well as changes in consumer preferences, given that many customers are opting for tablets rather than PCs. The manufacturer's enterprise business didn't fare much better, with sales to large corporate customers declining by three percent, and public sector sales dropping by four percent.

During a call with analysts, CEO Michael Dell gave some insight into his firm's future, including its plans for Windows 8. The exec said he doesn't expect businesses to transition to Windows 8 early on, since many corporations are still adopting Windows 7, though he did say that once Microsoft's new OS is available, his company will have a "full complement" of products ready for market, including new tablets.

Dell went on to say that unlike other Windows transitions, the shift to Windows 8 will likely require many users to purchase new products, "whether it's a tablet or an Ultrabook with touch or a notebook with touch or a PC with touch or some derivative hybrid of all of the above type of products." What this means for the company's bottom line remains uncertain, though the CEO acknowledged that "we think that the touchscreen products will certainly cost more." Dell went on to say that it remains uncertain whether consumers will overwhelmingly prefer tablets to PCs.

As far as Q2 projections go, Dell said it expects sales to rise between two and four percent from Q1, though it declined to offer an earnings forecast.

The Verge
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