Dell's enterprise gains offset consumer weakness in first quarter

Dell's enterprise gains offset consumer weakness in first quarter

Summary: Dell's fiscal first quarter earnings were better-than-expected as the company's enterprise sales offset weak consumer PC demand. However, storage revenue took a hit as Dell's partnership with EMC began to wind down.

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Dell's fiscal first quarter earnings were better-than-expected as the company's enterprise sales offset weak consumer PC demand. However, storage revenue took a hit as Dell's partnership with EMC began to wind down.

The company reported net income of $945 million, or 49 cents a share, on revenue of $15 billion, up 1 percent from a year ago. Non-GAAP earnings were 55 cents a share. Wall Street was expecting earnings of 44 cents a share on revenue of $15.4 billion. In other words, Dell did a nice job managing costs and cash flow even as revenue was lighter than expectations.

Dell's earnings report landed just a few hours after Hewlett-Packard's disappointing outlook. HP is also trying to offset falling consumer PC sales.

As for the outlook, Dell projected "mid-single digit revenue growth" in the second quarter. That projection is a bit above seasonal projections. Dell said that the public sector business---state and local governments and education---is expected to be strong. SMB sales are also expected to be strong due to Dell systems with the new Intel Sandy Bridge chips. Toss in back to school sales and Dell is relatively upbeat.

For fiscal 2012, Dell is projecting revenue growth of 5 percent to 9 percent and non-GAAP operating income gains of 12 percent to 18 percent from the prior year.

Among the moving parts in the first quarter:

  • Server and networking revenue was up 11 percent.
  • Dell-owned storage technology---Compellent, EqualLogic, PowerVault and DX Object Storage---saw an 11 percent sales gain from a year ago. Those gains, however, were wiped out by falling sales of EMC storage. Dell and EMC were long-time partners, but increasingly the two sides compete.
  • Large enterprise revenue was $4.5 billion, up 5 percent from a year ago, with operating income of $504 million. Enterprise services revenue was $1.8 billion, up 2 percent. PC sales to the enterprise were up 7 percent from a year ago.
  • Consumer revenue was $3 billion, down 7 percent from a year ago amid soft demand. However, Dell's consumer unit delivered operating income of $136 million. In the same quarter a year ago, Dell's consumer unit had operating income of $17 million. Dell cited a simplified brand structure as well as component costs for the operating profit.
  • Public revenue was $3.8 billion, down 2 percent from a year ago. Server revenue was up 9 percent in the public sector. Operating income was $370 million.
  • Dell's SMB unit had revenue of $3.8 billion, up 7 percent from a year ago. Operating income was $463 million.
  • Growth markets now represent 27 percent of total revenue. India sales were up 28 percent and China revenue was up 22 percent from a year ago.

As for the company's strategy going forward, Dell CEO Michael Dell said the company will invest $1 billion in research and development and organic growth. The primary focus will be data center efficiency, cloud computing and software.

Topics: Dell, Banking, Enterprise Software

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10 comments
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  • RE: Dell's enterprise gains offset consumer weakness in first quarter

    In less than an year, Apple's profit would be more than Dell's revenue. MD should just shut the shop and give money back to shareholders
    browser.
    • RE: Dell's enterprise gains offset consumer weakness in first quarter

      @browser.

      Yeah, because companies that pull in 1 billion in profit per quarter and still growing with more cash than debt are obviously doomed failures.

      ZOMG I ONLY MADE $4 BILLION THIS YEAR /SLITWRISTS
      SlithyTove
      • RE: Dell's enterprise gains offset consumer weakness in first quarter

        @SlithyTove

        Business 101.... Made = Profits. Dell didn't break $1 Billion in profits this year.

        Dell really should shut down. Their computers are utter junk, servers are a joke, and they offer nothing at all compelling.
        itguy08
      • It was a sardonic reference to Michael Dell commenting

        some years ago that if he were CEO of Apple, he'd sell the company and give the money back to the shareholders.
        fr_gough
    • Those that attached themselves to the MS star...

      are struggling. A lesson Nokia is about to learn.

      It's a struggle to excite your customers about new purchases when you have nothing new to offer:-(
      Richard Flude
      • I believe you are struggling quite a bit more

        @Richard Flude
        Your obvious attempts to discredit anything Microsoft have been failing of late.

        Would it not be logical to remain silent so as to retain the bit of dignity you still have?

        :|
        Tim Cook
      • Mister Spock, no quirky name changes?;-)

        Wow, Mister Spock is right. MS growth is outpacing Apple. HP and Dell results are really stellar. Nokia is about to enjoy unprecedented growth, following the massive market penetration of WP7.

        Sorry, it clearly isn't possible to discredit MS in such an environment. I'm just not sure in which reality this environment actually exists. Perhaps Mister Spock can help;-)
        Richard Flude
    • RE: Dell's enterprise gains offset consumer weakness in first quarter

      @browser.
      Ms. Herera noted that Dell Computer had so far resisted the move to open its own retail stores, unlike Gateway and Apple, and asked Mr. Dell if his company would ever consider doing so. ?No, you know, we figured out 10 or 15 years ago that you don?t need stores to sell computers,? replied Mr. Dell. He added ?We have stores; we call them online stores. Dell.com will generate close to US$20 billion in revenue for us this year. We think the best computer store in the world actually is at dell.com. Physical stores have been tried by a number of our competitors, and generally, actually I would say universally, that strategy hasn?t panned out.?
      Hasam1991
  • RE: Dell's enterprise gains offset consumer weakness in first quarter

    Dude, Dell is just cool like that.

    www.total-anon.us.tc
    ZogWee
  • HP and now Dell struggling in the consumer space.

    An area where Apple is enjoying double-digit growth. Interesting.
    fr_gough