With his stock splintering, Dell CFO Brian Gladden didn’t beat around the bush this afternoon: “We saw a very weak August,” he said in a fireside chat at a Bank of America investor conference. This August — a slow month every year — was “weaker than usual.” And business hasn’t “snapped back in September.”
Specifically weak: Small and medium businesses in the U.S., state and local government, Western Europe, the U.K., Southern Europe, China, and small businesses in Japan.
Dell stock is down 11% to $16.02 after the company said this morning it’s seen “further softening” in demand for its computers.
2:01 Brian Gladden joins Scott Craig on stage for a Q&A.
2:02 What’s changed since earnings — where is the weakness? As we said at end of Q2, we saw some weakening, some expanding to W Europe and part of Asia. Been six weeks, we saw a very weak August. Weaker than usual — generally a slow month. Seen the most slowing, haven’t seen it snap back in September, SMB market in US, state and local govt has slowed for us.
2:03 Southern Europe partic. weak. Weakness in China, some improvement since Olympics, but dug a bit of a hole there. Other parts of Asia… Japan SMB weak, see that continuing. Continues to be strong growth, market continues to be double-digit positive growth, but relative to what we were seeing, some level of slowing.
2:04 Not going to provide specific guidance around profitability — just demand. We think we can grow faster than market, but don’t know what market is going to drow in this enviroment. Focusing on product costs.
2:05 Some work from financial business perspective? Conducting strategic assessment of financing business. We pretty much accomplished assessment, conclusions are that we’re going to keep the business, invest to continue to expand capability, facilitates our growth. Was a difficult time to be out and try to have different strategic direction there. It’s a strategic asset for us.
2:06 Anything you can do to bring those cost savings forward quickly? Adjustment on size? Taking fresh look, being aggressive on cost. Big oppotunity in product cost. Gated by product launches as we’ve launched new platforms. Designed them to fit in marketplace in appropriate cost position so we can win. Tough to accelerate.
2:07 On last call, said issues in Europe were self-afflicted. How much softness seeing now trying to bring prices up in Europe and customers not responding? Committed to bringing European business back to historic levels of profitability. Not sure we said ‘immediately’… more broad-based slowing, not just our approach to the market. Being more careful the kinds of share gains we’re driving, more broad-based slowing than that.
2:09 Aggressively driving growth-faster-than-the-market model, especially in emerging areas. Those dynamics coupled with cost savings… it’s not an exact science. Any one of the quarters when we see some imbalance, that’s a challenge. The good news is in our business, we can get that in place pretty quickly, in terms of adjusting our pricing in the marketplace.
2:10 Seen improvement over the last couple of years of customer service metrics, have been flat recently, “acceptable.” Something we continue to focus on, think service levels are back to acceptable levels.
2:11 Done some work to cut back… Austin facility, small packaging hub. Nothing else specific to talk about today, will let you know.
2:12 Much has been made of HP-EDS deal. How does it affect you? Strategically, how do you think about services business? We view it as both — obviously challenges and opportunities. We’re assuming it does very well, creates a strong competitor with great opportunity. Clearly as we look at service business, it’s something we see as strategic to us. We continue to make investments there. Represents about 10% of total business today; we’d like it to be bigger. Will continue to build it out organically and inorganically.
2:14 Losing market share or macro? Have gained share everywhere — have been trying to do that. I’d say that based on what we’re seeing right now, still intend to gain share. Matter now of what underlying market growth is, adjusting expectations. Need to be in cost position to grow faster than market. Adjusting the prices affecting growth? We manage that; pretty decentralized. Make some overall high level decisions about growth vs. margins, let teams figure out the rest. Making some adjustments in some markets.
2:15 Focusing on some of big datacenter buildouts? Yes. Cloud computing, datacenter buildout big priorities for us.
2:16 Some big wins in U.S.
2:18 Committed to both Equallogic and EMC. Think they can both coexist.
2:19 What period in game is consumer business in terms of building out with channel? Reality is we gotta get scale. 15,000 retail locations up from about 0 a year ago. Still more to do. To become competitive, need to get more opex out of consumer business. Seven new products in first half, 17 in second half; lower cost to position themselves for retail channel.
2:21 Feel good about printer portfolio. Attach rates actually improving given the quality of offering; an important part of the portfolio.
2:23 Still have about $5 billion left on approved authorised buyback. Will continue in second half; still think it’s a good buy. Might want to keep some cash to potentially do other things.
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