Business

Dell slips into a slimmer red dress after sales diet

Hopes Intel Skylake CPUs, Windows 10 will draw in punters

By Drew Cullen

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Dell had an unremarkable Q1 of fiscal 2017, with its parent Denali Holding Inc today reporting revenues down 2 per cent year on the year to $12.5bn, but greatly reduced operating losses, trimmed 52 per cent from $335m to $161m.

The company burned through $63m in cash in the three months ended April 29 but this pointed to "seasonally low" cash generation in the period. Cash flow from operations improved about $800m year-on-year.

PCs continued to provide the lion's share of revenue, with the Client Solutions group pulling in $8.6bn, down 3 per cent year on year. Nonetheless, Dell knows how to make money from this challenging sector, generating divisional operating income of $385m, up 76 per cent.

The company cited strong notebook sales, growth in ancillary products and services, and improved costs. This translated to higher unit shipments and market share, which meant revenues fell less than rivals, Dell claimed.

Enterprise hardware revenue was $3.6bn, down two per cent, and income from ops fell 20 per cent to $192m. The company attributed the decline to sales recruitment and "solutions that position the company to address customers' critical IT needs in the data center."

On the plus side, it reported strong year-over-year revenue growth in Dell's Storage SC product line and said "modular server business strength maintained."

Dell's software group remains the minnow of the company, with flat revenues of $334m and operating income of $28m.

Group operating losses of $161m were greatly reduced on the prior year period, but were markedly worse than the $100m loss Dell had forecasted. This was due to higher operating costs of $90m ($36m in Q1 '15) caused by the pending acquisition of EMC and the dip in total sales.

In a conference call with analysts, Dell chief financial officer Tom Sweet said on redirecting cash to sales: "We believe the investments we made in expanding our sales force will prove accretive over time."

"While the PC market has been on a persistently downward trend, we do believe that the market will stabilize as adoption continues in new product offerings such as Windows 10, Skylake processors, and 2-in-1s.," he added, referring to Intel's Skylake processors. ®

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