Dell profits take a nosedive

Michael Dell has blamed deferred IT spending for a sharp decline in profits

Dell announced a fresh round of cost cutting on Thursday, in the aftermath of a rough fiscal quarter. Falling demand and shrinking budgets within the IT community caused Dell's profits to plunge by some 48 per cent over the quarter.

"A lot of IT spending is being deferred until there is better economic visibility," said Dell founder and chief executive Michael Dell.

"Within our business, we are being very disciplined in managing costs, generating profitability and cash flow, and investing in ways that separate Dell from others today and when the economy inevitably improves."

The company will now expand its planned cuts over the next two fiscal years from $3bn to $4bn (£2.1bn to £2.8bn).

Dell hopes that the cost cuts and its recent restructuring will help the company weather the current economic storm.

The firm said that its enterprise business revenue in the Americas over the quarter was down by some 17 per cent, while the EMEA region saw revenues drop by 17 per cent and the Asia Pacific & Japan region saw a 24 per cent drop.

Dell's consumer operation also struggled. Unit sales were up, but many customers opted for lower-priced machines which drove revenues down by seven per cent over the quarter.

Dell's woes reflect those of many companies in the IT sector. Last week, HP also cited falling demand in posting a 13 per cent drop in profits which included PC sales down 19 per cent and server sales down 18 per cent.