Dell Profits Soar On Rising Enterprise Sales

The computer maker says profits more than doubled as businesses spent more on services and replacing older systems.

Dell Streak Tablet
(click image for larger view)
Dell Streak Tablet

Dell's profits in the third fiscal quarter more than doubled and revenue rose 19%, as increased spending by businesses helped deliver one of the computer maker's best quarters since the return of Michael Dell as chief executive three years ago.

The company reported Thursday that, for the quarter ended Oct. 29, net income rose 144% to $822 million, or 42 cents a share, from $337 million, or 17 cents a share, the same period a year ago. Revenue grew to $15.4 billion from $12.9 billion.

Businesses this year have been upgrading aging computing systems that were held past their prime during last year's economic recession. Dell clearly benefited from that trend. Revenue across all of Dell's business segments -- enterprise, public, and small and midsized companies -- rose 24% year over year to $12.4 billion.

CEO Michael Dell said in a statement the strong results validated the company's strategy of offering "choice and efficiency at every level of the IT enterprise computing stack is taking hold, and we are more focused than ever to being a true partner -- not merely a provider -- to our customers."

Indeed, Dell has been moving quickly into providing enterprise-level services since the $3.9 billion acquisition of Texas-based Perot Systems last year. The move made Dell a better competitor against more diversified rivals like Hewlett-Packard and IBM. In the third fiscal quarter, enterprise services revenue, which included sales stemming from Perot, rose 31%.

Even the consumer side of Dell's business showed an uptick, even though consumer spending overall has been weak due to an economic recovery that has yet to spark hiring among businesses. Revenue from Dell's consumer business rose 4% to $3 billion.

Dell has been expanding beyond the PC to take advantage of emerging consumer devices, particularly smartphones and tablet-style computers. In August, Dell launched the Streak, which can make telephone calls and has a five-inch display for browsing the web. While it's too soon to say whether the device will be successful in the consumer market, Dell has already taken the Streak to the business side, offering the device pre-installed with applications for healthcare providers.

For the current fourth fiscal quarter, Dell forecasted revenue to be in-line to slightly up from the third quarter, saying it expected commercial sales to remain stable, while consumer demand remained "more muted." For the full fiscal year, Dell predicted a revenue increase around the middle of the 14% to 19% range.