Dell bets on improved IT demand amidst brighter economic outlook

20 Nov 2009

Computer giant Dell revealed a 1pc decline in revenues of US$12.9 billion and said that shipments, except for large enterprises and SMEs, were flat. However, the company says the IT world is improving and expects a major refresh cycle next year.

Total revenues were down 15pc from last year but the company says business continued to improve from recent quarters.

The company said that overall net income for its fiscal third quarter 2010 was down 54pc from US$727 million last year to US$337 million this year.

Employment numbers

Dell will continue to employ more than 2,000 people between its Limerick and Cherrywood, Dublin, operations after it closes down its manufacturing lines in Raheen, Limerick, with the loss of 1,900 jobs.

“We are seeing improvement in overall underlying IT demand that is continuing into the fourth quarter,” said CEO and chairman Michael Dell.

“The same is true with momentum in Dell’s business, specifically in our Large Enterprise and SMB segments. The launch of Windows 7 is being very well received by SMBs and consumers, and we’ll see the benefits of that more fully in our fiscal Q4,” Dell said.

Financial matters

During the third quarter, the company maintained cash flow of US$801 million and over the past four quarters generated US$3.4 billion of operating cash flow, up 40pc.

Operating expenses were US$1.7 billion, or 12.8pc of revenue, around 10pc lower than last year.

During the quarter, Dell completed the acquisition of Perot Systems, which is being integrated into the new Dell Services business.

“Consistently generating strong cash from operations allows us to expand our own capabilities and acquire new ones,” said chief financial officer Brian Gladden.

“Those investments will mostly be in higher-margin enterprise solutions, like our purchase of Perot Systems. Adding Perot best positions us to provide streamlined solutions that help customers get the most from their IT budgets.”

Fourth-quarter outlook

For the fourth quarter, Dell is predicting seasonal demand improvements in its consumer business, while demand in its public-sector business divisions will be lower. The company predicts fourth-quarter revenue to improve over the third quarter.

The company added that new technology products, improvement in economic activity and the prospect of a lift in associated IT spending will position the company well.

By John Kennedy

Photo: Dell CEO and chairman Michael Dell.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years