But he argues that Dell's price cutting may have caused buyers to speed up some purchases, drawing from sales that would have occurred in the second quarter. And Dell rivals, particularly Compaq Computer Corp., remain willing to slash prices. So Dell will have to continue cutting prices in order to gain sales in the coming quarter. But lower prices mean lower profits. While Dell has been willing to accept somewhat lower profits, there is a limit to what investors will allow.
Gross margin is a measure of basic profitability and costs of a company's core business.
Across the PC industry, gross margins have been reduced steadily by price cutting. Kumar estimates every percentage point decline in gross margin translates to a loss of 1-2 cents of net earnings per share . That results in a net reduction in personnel of about 3,000. This material shall not be published or redistributed directly or indirectly in any medium.