Update: Dell results boosted by enterprise sales

Consumer revenue down 8%, but enterprise and SMB come through

Dell on Tuesday reported a 177% year-over-year increase in net income for its fourth fiscal quarter of 2011, driven by growth in enterprise server and PC sales.

Dell's profit was $927 million for the quarter ended Jan. 28, up from $334 million in the previous year's fourth quarter.

Revenue was $15.69 billion, an increase of 5% year over year. Analysts expected revenue of $15.71 billion.

Dell's Large Enterprise division generated $4.7 billion in sales, up 12% from a year ago, driven by a strong demand for PCs and servers. Revenue from the Small and Medium Business division grew 12% year over year, to $3.7 billion.

However, revenue from Dell's Consumer division declined to $3.3 billion, a drop of 8% from last year's fourth quarter, when its PC sales were boosted by the launch of Microsoft's Windows 7 OS.

Dell's focus in the past year was building out its enterprise product and service businesses, CEO Michael Dell said on a conference call. The goal for the current year is to expand that business further into new areas such as the cloud, he said.

The "epicenter" of the company has shifted away from PCs and toward the enterprise, Dell said, meaning toward products for the data center, rather than PCs. "Customers are now viewing Dell in a new light," he said.

The enterprise business grew as companies upgraded older PC and server equipment, said Brian Gladden, Dell's chief financial officer. Dell's margins improved thanks to lower component prices and selling more products in higher price bands, he added.

Overall server and networking revenue for the company was $2.09 billion, up 16%. Its desktop and mobility revenue -- which includes laptop sales -- both grew by 4%.

Dell will try to keep growing its enterprise business through small acquisitions that strengthen its hardware, software and services offerings, Gladden said.

During the past quarter, after it lost a bidding war for 3Par with Hewlett-Packard, Dell announced plans to buy storage company Compellent for $960 million. It also bought security vendor SecureWorks, cloud integration company Boomi, and medical imaging, archiving and storage vendor Insite One.

Dell has also started selling smartphones and tablets for enterprise users, and hopes to sell services around those devices, said Steve Schuckenbrock, president of Dell Services.

Dell has announced 10-inch tablets this year based on both Google's Android and Microsoft's Windows operating systems. Michael Dell said there are no other viable alternatives for the company to consider. Hewlett-Packard is building mobile devices based on its webOS, while Apple has its iOS for the iPhone and iPad.

Dell expects its consumer business to perform better in the current fiscal quarter, Gladden said.

In January, IDC said worldwide PC sales in the fourth quarter were hurt by competition from tablets and a slowdown in consumer spending. PC shipments totaled 92.1 million units, which is growth of only 2.7% and lower than IDC's original forecast of 5.5% growth.

Dell expects its revenue in fiscal 2012 to increase by between 5% and 9%.


Copyright © 2011 IDG Communications, Inc.

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