Dell names new enterprise chief as profit drops 18 percent

IDG News Service - Dell has tapped a former Hewlett-Packard executive to run its server, networking and storage division, an important area for Dell as it tries to expand its data center business and reduce its dependence on PCs.

Marius Haas was head of HP's networking business before leaving two years ago to join an investment firm. On Tuesday he was named president of Dell's enterprise solutions business, where he'll oversee the engineering, development and marketing of Dell's enterprise products.

Haas replaces Brad Anderson, who ran Dell's enterprise division since 2005 and is now leaving the company.

Dell announced the news on the same day it reported financial results for its second quarter, which closed Aug. 3. Its profit for the period declined 18 percent from a year earlier, to US$732 million, while revenue fell 8 percent to $14.48 billion, Dell said.

Its server and networking sales were among the highlights for the quarter, up 14 percent from last year, while sales of storage products were down 13 percent. Together, the three product categories account for about one-fifth of Dell's overall business.

Most of Dell's money still comes from desktop PCs, sales of which were down 9 percent from last year, and from laptops and other mobility products, which were down 19 percent. Revenue from services was up 3 percent, Dell said.

Its forecast for the rest of the year was not good. Citing the uncertain economy, weak consumer sales and "competitive dynamics," Dell said its third-quarter revenue would be down 2 percent to 5 percent from the quarter just ended. It also reduced its full-year profit forecast to $1.70 per share, well below the consensus analyst estimate of $1.91 per share.

A new OS release can sometimes boost sales for PC makers, but Dell doesn't expect much benefit from Windows 8, at least in the near term. Dell sells most of its PCs to businesses, rather than consumers, and a lot of businesses are still completing their migration to Windows 7, CTO Brian Gladden said on a conference call.

The company may see "a bit of benefit" from Windows 8 going into next year, he said.

Dell is in the midst of a turnaround effort to make more money from higher-margin products such as software and services, and those products are often sold hand in hand with data center equipment, making Dell's enterprise products business important.

As part of the effort, Dell has been buying up software companies such as SonicWall, AppAssure, Scalent and, most recently, Quest Software, which at $2.6 billion will be one of its biggest acquisitions to date. It hopes to package those products with its enterprise hardware to expand its sales.

Revenue for the quarter just ended was below what financial analysts had been expecting, according to a consensus estimate from Thomson Financial. Its earnings before one-time items beat the forecast, however, coming in at $0.50, compared with the analyst forecast of $0.45.

Dell's shares on the Nasdaq ended the trading day at $12.34, down 1.75 percent. In trading after hours, its shares slipped a further 4.5 percent to $11.78 at the time of this report.