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Notebooks deliver Q4 boost at Dell

Single-digit future doesn't impress

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Dell greased the squeaky wheel during its fourth quarter and corrected a six-month slowdown. The hardware assembler pushed revenue higher 13 per cent to $15.2bn and pumped out a 52 per cent year-over-year gain in net income to $1.0bn. The results, however, did little to impress investors who frowned on Dell's forecast of single-digit growth in the first quarter.

Growth has long been the main item of note when talking about Dell. In the good old days, the company wowed investors by churning out huge double-digit gains quarter after quarter. Of late, though, Dell has struggled to keep up the brilliant performances. Some critics charge that the company remains too dependent on low-profit PCs, while Dell insists that it's expanding at pace in other areas.

So it was no surprise that Dell pointed to growth with its enterprise hardware businesses at the top of today's fourth quarter report. Server, storage, software and services revenue jumped 21 per cent year-over-year, Dell said. Digging deeper into Dell's results, you see that storage, services and software and peripherals did most of the work.

Dell increased storage revenue by 41 per cent year-over-year, boosted services by 26 per cent and boosted software and peripherals sales by 22 per cent. Sever sales were just 10 per cent higher. Opteron, anyone?

The company's PC business was flat at $5.6bn, while notebook sales surged 22 per cent to $3.8bn, accounting much of Dell's overall growth.

"We drove a better balance across all price points of our products and greater operational efficiencies this quarter, and performed at the high level of execution we expect for ourselves," said Kevin Rollins, Dell's CEO. "Our success in countries such as China and Germany shows the Dell direct business model is preferred by customers in all regions and provides us with a unique advantage and opportunity for continued growth."

For the full year, Dell posted a 14 per cent revenue rise to $55.9bn and a 17 per cent net income rise to $3.6bn. Dell's server business grew just 11 per cent year-over-year, making it the worst performing unit at the company in 2005 after PCs (2 per cent growth). Opteron, anyone?

Dell is looking for first quarter revenue to come in between $14.2bn and $14.6bn. Analysts had been hoping for a revenue forecast of at least $14.7bn. Shares of Dell dipped slightly in the after-hours markets. ®

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