Dell Profit Beats Forecasts Efforts to Win Back Clients Start to Pay Off MARKETPLACE By Bloomberg

Jun 01, 10:41 AM

Current Headlines: By Connie Guglielmo

Dell, the world's second-largest maker of personal computers, reported first-quarter profit and sales that beat analysts' estimates after working to win back customers from the market leader, Hewlett-Packard. The company also announced plans to cut 10 percent of its work force.

Net income was $759 million, down from $762 million a year earlier, the company said. Sales totaled $14.6 billion, compared with the $14.1 billion anticipated by analysts. That was up from $14.2 billion a year earlier.

Since resuming his role as chief executive in January, Michael Dell revamped his management team, started a Web site to solicit customer ideas for products and announced plans to move away from his original direct-sales strategy and offer computers through retailers. Last week, the company said that Wal-Mart stores would sell some PCs starting in June.

"They are figuring out ways to serve the entire customer base, with retail being one of the channels they need to evaluate," said Rick Hanna, an analyst with Morningstar Investment Service in Chicago. "Things are changing."

Dell, based in Round Rock, Texas, has 88,100 full- and part-time staff, according to a spokesman, Bob Pearson, which means that about 8,800 jobs will be cut.

The company has said that improvements will take time. After ousting Kevin Rollins as chief executive in January, Dell added a chief marketing officer, and tapped the former mobile phone chief at Motorola, Ron Garriques, to oversee a new consumer division. He also pledged to improve product design.

This is the third straight quarter that Dell has provided only preliminary results while the U.S. Securities and Exchange Commission examines its accounting practices. The agency began its review in August 2005, elevating that to a formal investigation in November the following year. Dell said in March that it had found evidence of misconduct and errors in its financial results.

The shares closed 69 cents higher, or 2.6 percent, at $26.91 Thursday in New York. They have advanced 7.4 percent this year, compared with an 11 percent gain at Hewlett-Packard, which has led in PC sales for three straight quarters.

Wal-Mart will offer two Dell desktop PCs with processors from Advanced Micro Devices in the United States, Canada and Puerto Rico starting June 10.

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