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Dell hammered over record Q3

Vendor eyes sales as turnaround key

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Some candy ass $63bn companies out there might find nine per cent revenue growth satisfactory. But not Dell.

The 2.0-ified hardware maker today rolled out third quarter financial figures, showing a near double-digit rise in revenue to $15.6bn. Buoyed by improved gross margins and cost cutting measures, Dell turned around a 13 per cent year-over-year rise in operating income as well, hitting $829m. When all was said and done, Dell pocketed $1bn in cash during the quarter, leaving it with $14.6bn.

While such figures might make other companies drool, Dell - via founder Mike - expressed displeasure.

"We are not happy with our growth rate as it is today," he said, during a conference call.

Investors appeared to agree with Dell's inadequacy complex. As this story makes its way to the web, Dell shares have shed 10 per cent of their value in after-hours trading. "Thanks for nothing, Mike."

Shareholders were apparently hoping for more in the now-term and also concerned about Dell's less than overzealous outlook. The company warned that it will continue to incur some restructuring costs, as it goes along with a major business revamp. In addition, the remarkably low component costs enjoyed during the second quarter have started to rise, affecting profits. And, lastly, Dell executives continued to warn that investors who have been accustomed to seeing very consistent results from Dell should expect "non-linear" figures as the big ship turns to chart a new course.

CEO Dell and loquacious CFO Don Carty presided over a Texas-sized conference call to discuss the third quarter that lasted about an hour and a half. Dell had been skipping these customary end of quarter calls as it dealt with a long-running accounting debacle. Apparently, management felt they needed to make up for lost words by forcing analysts and press to endure the 90-minute spiel that covered Dell's fresh product strategy as well as the P&L minutiae.

Take Five

You're told by Michael that "We embarked this year on a long-term strategy to re-ignite growth and our Q3 results indicate we’re making solid progress through investments in five key business priorities – consumer, emerging countries, notebooks, enterprise and small/medium business."

Dell is all about these five priorities, describing them as newfound opportunities to outgrow rivals. In fact, Carty took up close to an hour talking about how amazing these priorities are. At the end of his speech, he thanked the conference call crowd and said he hoped we'd all learned something new.

Er, not so much. If you're like us, you've thought Dell rather interested in all five markets - Hello! Notebooks! - for a very long time. But maybe we're missing just how much more seriously Dell is taking, say, enterprise customers now. Oh wait . . .

Moving along

During the third quarter, Dell's PC sales fell 1 per cent to $4.8bn. Notebook sales, however, jumped 19 per cent to $4.7bn.

The server, storage and services businesses all grew about eight per cent to $1.6bn, $600m and $1.4bn, respectively. Software and peripherals sales rose 11 per cent to $2.5bn.

Sales rose by 18 per cent in Asia/Pac and 14 per cent in Europe. But the Americas turned in less impressive growth at five per cent.

The analysts, of course, wanted to know if Dell feared some future sales woes as a result of the credit/housing crisis that's toying with peoples' nerves.

"There hasn't been a marked slowdown," Michael Dell said. "I would say there have been winds of caution with certain financial customers. I would say demand is pretty good." ®

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