Dell earnings: Enterprise spending rebounds

Dell reported a better-than-expected fourth quarter as enterprise sales rebounded. The company said that it was "cautiously optimistic" that commercial IT spending will improve throughout the year ahead amid "ongoing signs of stabilization."

Dell reported fiscal fourth quarter net income of $334 million, or 17 cents a share, on revenue of $14.9 billion, up 11 percent from a year ago. That sales tally was $1 billion more than Wall Street expected. Non-GAAP earnings were $544 million, or 28 cents a share, a penny ahead of Wall Street estimates.

For fiscal 2010, Dell reported net income of $1.43 billion, or 73 cents a share, on revenue of $52.9 billion, down 13 percent from a year ago (statement).

Dell reported fourth quarter gross margins of 16.6 percent. Non-GAAP gross margin was 17.4 percent. Both figures fell short of the 18 percent expected by Wall Street.

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The company did have some bright spots. Dell revenue from commercial customers gained 11 percent in the fourth quarter and demand improved across the board. Meanwhile, BRIC revenue (Brazil, Russia, India and China) was up 72 percent with an 81 percent gain in China.

In a call with analysts today, CEO Michael Dell said that demand started to return in the latter half of the year and that those demands - across all business segments - have increased. Customers are interested in server and storage offerings, Dell said, but that an aging install base and the arrival of Windows 7 also helped boost the refresh market. He noted that customers see the refresh into Windows 7 as a productivity enabler but that the refresh takes a while. Dell said he expects that refresh to stretch into 2011.

He noted that, as the company continues with its transformation strategy, it will continue to invest in higher-margin business, as well as those that generate revenue on a recurring basis, particularly services, which was boosted by the Perot acquisition.

By the numbers:

• Large enterprise revenue was $4.2 billion, up 8 percent from a year ago. Operating income was $281 million.

• Public sector revenue was $3.8 billion, up 16 percent from a year ago. Excluding the gains from Perot Systems revenue for the public sector unit was up 3 percent. Operating income was $333 million.
• Small and medium sized business revenue was up 10 percent from a year ago to $3.3 billion. Operating income was $282 million.

• Consumer revenue was $3.5 billion, up 11 percent from a year ago. Revenue from consumer mobility products---notebooks and netbooks---was up 26 percent from a year ago.

• Dell ended the quarter with $11.88 billion in cash and investments.