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2/15/2011
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Dell Q4 Profits Up 177%

Strong business PC, server, and storage sales drove revenue of $15.7 billion with the computer maker reporting record profitability in enterprise products and services.

Dell reported that fiscal fourth quarter profits grew almost threefold from a year ago, driven by strong sales of business PCs, servers, and storage, which countered a drop in consumer sales.

The computer maker on Tuesday said net income for the quarter ended Jan. 28 rose 177% to $927 million, or 48 cents a share, from $334 million, or 17 cents a share, the same period a year ago. Revenue rose 5% to $15.7 billion from $14.9 billion. Gross margin was 21%, compared to 16.6% a year ago. The big jump was due to record profitability in enterprise products and services, lower component costs, and strong commercial sales.

Dell's profits handily beat analysts' estimate of 37 cents a share, while revenue for the quarter was a tad under Wall Street expectations of $15.72 billion, according to Thomson Reuters.

Revenue from Dell's enterprise products and services rose 7% to $4.6 billion in the quarter, representing 29% of the company's revenue. Server revenue increased 16%, while EqualLogic storage sales grew 49%. Combined sales to enterprises, the public sector, and small and midsize businesses (SMBs) were up 9% to $12.4 billion, with revenue for commercial laptop and desktops rose 10%.

Dell showed progress in its strategy of building a services business to drive commercial sales Revenue increased 1% to $1.9 billion, reaching the company's first-year revenue targets following the integration of services firm Perot Systems, which Dell acquired in September 2009 for $3.9 billion.

During a conference call with financial analysts, Steve Schuckenbrock, head of Dell services, said the company is seeing services start to drive sales. "We are seeing hardware pull-through," he said. "We're 'solutioning' Dell hardware and Dell reference architectures into our core service offerings when we compete for bids."

Consumer sales, which were weak throughout 2010, fell 8% year over year to $3.3 billion. Dell attributed the drop to the release of Microsoft's Windows 7, which boosted PC sales in the fiscal fourth quarter a year ago.

Dell executives said the company would focus on improving consumer sales in the current fiscal year. "We're counting on the consumer business to bring improved FY (fiscal year) margins in 2012," Brian T. Gladden, Dell chief financial officer, told analysts.

Dell planned to release smartphones and tablets to boost sales, both emerging categories that are growing quickly as the overall PC market slows. Chairman and chief executive Michael Dell told analysts that the company would release this year 10-inch tablets running Microsoft Windows 7 and Google Android 3.0 Honeycomb. "We think those will be reasonable platforms for us to participate more broadly in this space," Dell said.

Last June, Dell said in response to a question at the Sanford C. Bernstein investor conference that he had considered taking the company private, but declined to say what would make him take the thought more seriously. Gladden on Tuesday assured analysts that was not on the table. "We have no intention of taking the company private," Gladden said.

Intel last month suspended for several weeks shipments of chipsets for its second-generation Core processors, after finding that the chipset had a design flaw. Dell at the time said customers could return any PCs with the flawed technology. On Tuesday, Gladden said there was very little impact on Dell, because the company had very few of the chipsets in the supply chain. "We have seen minimal impact to our customers."

For the current fiscal quarter, Dell forecast seasonal declines in its consumer and public businesses, which would drive a "slight" sequential decline in revenue. For the current fiscal year 2012, Dell forecast revenue growth of 5% to 9% year over year.

SEE ALSO:

Dell Introduces Mobile Enterprise Services

Global CIO: Dell Preps iPad Killers As Cloud Business Booms

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