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Dell Profits Fall; Adds AMD To Arsenal

5/19/2006 08:20:00 AM Eastern

Round Rock, Texas — Dell posted an 18 percent falloff in net income, to $762 million, for its first fiscal quarter, even though sales bounced up 6 percent to $14.2 billion.

The company also announced it would start using processors from AMD, although initially they will only be used in Dell’s high-end server line. Dell had been a staunch supporter of Intel.

Dell executives blamed a series of market conditions for the falloff in first quarter, ended May 5, net income. Dell had slashed prices on its entry-level platforms during the past six months in an attempt to drive business at the low end; meanwhile, it purchased high-end gaming PC maker Alienware to bolster its image and position at the other end of the price spectrum.

“The competitive environment has been more intense than we had planned for or understood,” said Kevin Rollins, Dell's CEO. “Over the last year, we tried to achieve both growth and increased levels of profitability, which allowed our competitors to improve their relatively low levels of profitability and accelerate their growth. We have now taken action to reignite our growth and reassert the unique value of our Direct Model.”

Some of the steps Dell is taking to improve its situation going forward includes hiring 2,000 sales and support personnel for the U.S. market, adding call centers in Oklahoma City, Nashville, Manila and Ottawa and a total refresh of its desktop, notebook, server and storage lines later this year.

Rollins said much of Dell’s future growth will come from outside the United States.

“We are confident in our ability to continue growing globally, particularly when we remember that 95 percent of the world's population lives outside the U.S., and we have less share of market outside the U.S. than some of our competitors,” he said.

Rollins downplayed the company’s decision to go with AMD, stating that they would only be used in a few products and that Intel was still Dell’s primary processor partner.