Dell's Income Doldrums May Be Over, But Job Cuts Will Continue

If the figures from Dell Computer's last fiscal quarter hold up after a potential wave of possible corrections due to its admittedly improper accounting of backdated stock options grants, the company may not have fared all that poorly in the three-month period between the first weeks of February and May. It's not growing much as a company, but it's not shrinking either, posting slightly higher revenues ($14.6 billion, up 2.9% annually) and only slightly lower net income ($759 million, down 0.4% annually).

The good news sparked a late rally in Dell stocks near the close of trading on the NASDAQ this afternoon, gaining about two thirds of a point to $26.91/share in the last few minutes of regular trading before gaining another 5% in after-hours trading, to $28.34 by 4:30 pm.

The usual quarterly analysts' call was skipped once again this time, as the company still has too many questions to answer to the US Securities and Exchange Commission before it begins addressing investors directly once again. A statement did confirm the company will continue job cuts, with a plan to eliminate another 8,800 jobs, or 10% of its workforce. But that move was expected, and even demanded by some, as once-and-future CEO Michael Dell works to put his company back on a firm footing, with what it states to be a "goal to simplify structure, eliminate redundancies and better align operating expenses with the current business environment and strategic growth opportunities."

Despite what industry analysts have characterized as a slump for Dell, especially losing market share to Hewlett-Packard and a resurgent Acer, the company says it's actually doing fairly well in all the departments the slump is supposed to affect. It still makes a third of its revenue from desktop PC sales, and 27% of its revenue (up 1% on the quarter) from mobile PCs. Revenue from desktops actually rose by $300 million on the quarter to $4.9 billion, and from notebooks up $200 million to $4.0 billion.

If these numbers are accurate - and Dell has given reason for some to believe they're not - then the company may very well be returning to a growth pattern, or at least may have stopped the bleeding. But in its 8-K filing with the SEC this afternoon, Dell mentions the various shareholder lawsuits, including class action suits, pending against it.

One of these suits is described thus: "The lead plaintiffs have asserted that a temporary decline in the price of Dell stock gives rise to claims under ERISA [Employee Retirement Income Security Act] based on allegations that the company, certain current officers, and certain current and former directors imprudently invested, managed, or disclosed information regarding Dell stock held in the 401(k) plan."

Or, as a document published after the suit was filed last September puts it, Dell's stock price fell as a result of news of the SEC investigation, and 401(k) fund managers didn't react quickly enough to protect employees' investments.

This is one of the many burdens Michael Dell still has to bear as he endeavors to save not only his company but his reputation. With Donald Trump no longer in the business of training "Apprentices," investors need a new hero, and perhaps Mr. Dell may yet fit the bill.