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Dell hints at services, storage ambitions

EMC deal worth $1bn a year

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ComputerWire: IT Industry Intelligence

Dell Computer Corp emphasized its enterprise credentials and shrugged off the threat of the Hewlett Packard Co and Compaq Computer Corp combination as it unveiled its fourth quarter numbers yesterday,

Joe Fay writes

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The Round Rock, Texas-based PC vendor said it was considering ways of expanding its services capabilities and said it expected to realize a revenue run rate of $1bn a year through its alliance with high end storage vendor EMC.

At the same time, Dell said it expected to be able to capitalize on an eventual move by corporates to upgrade an installed base that is becoming ever more advanced in age.

For the quarter ending February 1, Dell turned in revenues of $8.1bn, a 7.1% drop on the year. Operating income was up 22.7% to $594m, while net income was $456m, up 5%, delivering earnings per share of $0.17. However, once a special charge last year was excluded, this year's net profit was actually down 10.2%. For the full year, sales were down 2.3% to $31.2bn, while net income was down 42.8% to $1.2bn.

The fourth quarter figures matched a raised forecast Dell delivered in January. The company said it had seen better than expected performance in the consumer market.

However, the company was at pains to point up both the past performance and future potential of its corporate business. It highlighted increases in server shipments that it said outstripped the industry as a whole, saying its shipments of enterprise systems grew 12% over the same quarter last year.

The company's presentation highlighted the growth of its storage business.

Kevin Rollins, Dell's president and COO, said the company's existing storage business generated revenue of around $1bn per annum. He said he expected its tie-up with EMC, which kicked off on January 1, to hit a similar run rate by the end of this year.

Rollins added that the company was keen to expand its professional services offerings. He said it was continuing to "explore the possibility of adding to services capabilities through acquisition."

Rollins refused to be intimidated by the combination of rival industry giants HP and Compaq, saying that chunks of both companies' computing businesses are not currently making money.

Looking ahead the company predicted revenues for the current quarter to be down 3% to 5%, with earnings per share of around $0.16. It described the expected drop in sales as below average taking into account seasonal factors.

It was loath to make any further predictions on the path the technology market might take over the rest of the year, except to restate its belief that corporations were itching to upgrade their systems. Rollins said that CIOs the company had spoken to were increasingly "apprehensive" about the age of their PC fleets. "We believe the upgrades are going to come" he said, "but it's very dependent on the economy."

He added that the inability of many machines to run Windows XP was one of the factors encouraging CIOs to consider upgrading, and that 49% of the company's shipments are now running XP.

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