Friday, November 21, 2008

Even in tough times, profits exist

Dell (NASDAQ: DELL) posted a posted a 5% drop in net income and a 3% decline in revenue for its fiscal third quarter, according to an announcement made earlier today. That sounds like bad news, and it is. But it's not terrible news. Even though the company experienced its very first year-over-year drop in revenue, they still managed to earn over $720 million in the quarter ending October 31, 2008.

Read that again.

In what will likely go down as being among the worst 90-day periods of the post WWII era, a single company earned almost three quarters of a billion dollars. Last month's quarterly reports had to be interpreted with the understanding that, in July, we hadn't yet gotten cold-cocked by the events of August and September. But the quarterlies for this month will account for all of those system shocks.

I believe that the next 90 days will be absolutely critical. If firms come out of that period with a sense that, "Yeah it was bad, but we are still in one piece," then things will turn around in the 2nd and 3rd quarters of 2009. But if firms look at final 2008 results and find themselves in jeopardy, then these tough times might extend into 2010.

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