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Dell vows to slash more costs

Shares rise as company raises its cost cutting goal by a third to $4 billion.

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By Catherine Clifford, CNNMoney.com staff writer

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NEW YORK (CNNMoney.com) -- Dell Inc. posted lower fiscal fourth-quarter earnings and sales Thursday, and the computer maker increased its cost-cutting goal to $4 billion from $3 billion in the face of challenging economic conditions.

Shares rose more than 2% in after-hours trading.

The company posted net income of $351 million, or 18 cents per share, in its fiscal fourth quarter ended Jan. 30.

The per-share net included previously announced combined expenses of 11 cents for reorganizational costs and stock options, bringing operating income to 29 cents a share.

Dell earned $679 million, or 31 cents a share, in the same quarter a year earlier.

Analysts were expecting operating earnings per share of 26 cents, according to a consensus estimate compiled by Thomson Reuters.

The Round Rock, Texas-based company reported $13.4 billion in sales in the fiscal fourth quarter, below the analysts' estimate of $14.2 billion and down from $16 billion a year earlier.

The global economic downturn has companies pinching their technology spending. Information technology can improve productivity, "but a lot of IT spending is being deferred until there's better economic visibility," said Michael Dell, chairman and chief executive officer, in a written statement.

In the face of tough economic headwinds and reduced technology spending, Dell announced that it will cut costs more than originally announced.

"The cost actions we took this past year made us more competitive and delivered value to customers in a challenging economic environment," said Brian Gladden, Dell's chief financial officer, in a written statement. "In fact, we now have a clear view to additional opportunities, and are raising our cost-reduction target to $4 billion."

In the conference call after the report was released, Gladden said that given the tough economic environment, "we focused our business on elements we could control."

"We can and we will continue to rapidly adjust our cost structure in this deteriorating environment," added Gladden.

Gladden also said Dell would continue to have to pay reorganizational costs in the fiscal first quarter as the company adjusts itself to the coming economic environment.

"We can not predict how deep and long this slowdown will be," said Gladden.

For all of its fiscal year, Dell posted earnings per share of $1.25 on sales of $61.1 billion. That was down from earnings of $1.31 a share and revenue of $61.13 billion in the prior year. To top of page

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