Feeds

Dell carves profit from slim revenue growth

HP it's not

Next gen security for virtualised datacentres

Dell didn't dive as much as HP. Dell had lower sales than expected during the its first quarter of fiscal 2011, but it boasted a big profit boost, raising its expectations for revenues and earnings for the full year. HP, by contrast, is tightening its belt, while shaving $1bn to $1.5bn off of its revenue projections for the year.

Both companies have done what mature companies do, which is balance revenue growth against the profits that you can get out of a hyper-competitive IT environment. IT vendors have learned to walk away from deals in recent years. "We continue to believe that earnings share is more important than market share," explained Brian Gladden, Dell's CFO, on a conference call with Wall Street analysts. And the Dell numbers show that.

In the first quarter, Dell's hardware product revenues were down a fraction of a per cent, to just over $12bn, while services and software revenues were up 6.1 per cent, to just under $3bn. Overall revenues were only up a point, to just over $15bn. Gross margins rose by 36 per cent, to $3.43bn, thanks to substantially lower manufacturing and sales costs for its products. Net income was up a very impressive 177 per cent, to $945m, which worked out to 50 cents per share, nearly triple the EPS from the year-ago quarter.

A day after HP admitted to problems in its most recent quarter, Gladden said much the same of Dell. "As we moved through the quarter, consumer demand was weaker than expected," he said. But SMB spending levels were the highest that Dell has seen in two years, and the company is expected a sales bump in its public sector unit as state and local governments move into their new budget cycles in the second half this calendar year.

In fact, Paul Bell, president of Dell's Public and Large Enterprise business unit, said that while budget cuts among governments had curtailed the PC refresh cycle, the same budget cuts had boosted spending on server and storage consolidation projects where IT departments are being charged to cut costs.

Gladden said that Dell's PC business was "radically improved" compared to three years ago, when Dell began to sell its products through retail channels and it started shifting to contract manufacturing. Dell's desktop PCs accounted for $3.3bn in sales, down 8 per cent, but mobile PCs hit $4.72bn in the first quarter, up 3 percent.

Dell's server and networking business had an 11 per cent sales jump, to $1.97bn, and Gladden said that blade server revenues rose 23 per cent and networking gear sales were up 32 per cent. Dell's storage revenues fell 13 per cent, to $481m, but that is because it is not really peddling EMC arrays any more (revenues were off 43 per cent) while ramping up its own PowerVault, EqualLogic, Compellent, and DX Object Storage arrays. These Dell-branded products had an 11 per cent increase in revenue in the quarter, but do not quite make up for the lost EMC disk array sales.

Dell's services unit, anchored by the former Perot Systems, grew by 5 per cent to just under $2bn. Outsourcing accounted for $703m during the quarter (up 3 percent), while services projects helping customers wrestle with their infrastructure and applications were $187bn (up 13 per cent). The transactional services revenue – meaning support contracts for Dell and third party products – represented $1.1bn (up 5 per cent). Dell exited the quarter with a $14.1bn services backlog, pretty evenly split between support and outsourcing deals.

Software and peripherals posted a 3 per cent bump, to $2.57bn.

By customer category, Dell's public sector customers spent $43.77bn (down 2 per cent), while large enterprises spent $4.48bn (up 5 per cent). The small and medium business segment grew by 7 per cent, to $3.77bn, while Dell's consumer business shrank by 7 per cent to just a tad over $3bn.

Looking ahead to its second quarter, Gladden said that Dell expected sequential revenue growth "in the mid-single digits", which he said was slightly above the normal seasonality from Q1 that comes in at a 2 to 3 per cent bump. For the full fiscal 2012 year, Dell raised its revenue guidance to between 5 and 9 per cent growth and raised its non-GAAP operating income to between 12 and 18 per cent. ®

Secure remote control for conventional and virtual desktops

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Kaspersky backpedals on 'done nothing wrong, nothing to fear' blather
Founder (and internet passport fan) now says privacy is precious
TROLL SLAYER Google grabs $1.3 MEEELLION in patent counter-suit
Chocolate Factory hits back at firm for suing customers
Mozilla's 'Tiles' ads debut in new Firefox nightlies
You can try turning them off and on again
Facebook, Google and Instagram 'worse than drugs' says Miley Cyrus
Italian boffins agree with popette's theory that haters are the real wrecking balls
Sit tight, fanbois. Apple's '$400' wearable release slips into early 2015
Sources: time to put in plenty of clock-watching for' iWatch
Facebook to let stalkers unearth buried posts with mobe search
Prepare to HAUNT your pal's back catalogue
prev story

Whitepapers

Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Advanced data protection for your virtualized environments
Find a natural fit for optimizing protection for the often resource-constrained data protection process found in virtual environments.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.