Dell results show PC industry is on road to recovery

28 Aug 2009

Dell’s latest quarterly figures that point to stabilising global technology spending and growing PC shipments. The company expects a refresh in IT spending by businesses beginning in the US in 2010.

Dell’s second quarter results show shipments were up 10pc and revenue was up 3pc on the first quarter amid stabilising spending on IT.

Combined revenue from servers and storage was up 7pc.

Second quarter revenues were US$12.8bn, 22pc lower than last year but 3pc up on the first quarter. Operating income was US$671 million.

The company reported an overall profit of US$472m, down 23pc on last year’s profit of US$616m.

Cashflow from operations was US$1.1bn and the company ended the quarter with US$12.7bn in cash and investments.

Gross margin was 18.7pc of revenue as strong improvement in cost of goods sold, disciplined pricing, a sequential increase in sales from enterprise products, and a US$69m buyout of a revenue-sharing agreement by a vendor offset previously highlighted pressure from component costs, competitive pricing and revenue mix in client systems.

Since launching its US$4 billion restructuring last year, about 70pc of Dell’s total product volume has been redesigned to reduce costs.

Dell further strengthened its enterprise position in the quarter. Revenue from EqualLogic storage systems was up 42pc year-over-year. Server product shipments were up 12pc and revenue was up 9 percent sequentially.

Dell continues to build its emerging country presence as combined revenue from the BRIC countries—Brazil, Russia, India and China—grew 16pc quarter on quarter. Sales in BRIC now comprise 10 percent of total company revenue.

“We have been reducing complexity in our organization and significantly lowering operating costs, in anticipation of improvement in the global economy and IT spending,” CEO and chairman Michael Dell said.

“If current demand trends continue, we expect revenue for the second half of the year to be stronger than the first half. We are expanding our capabilities in enterprise technology and services and investing in our core business to distinguish Dell both with customers and in operating performance,” Dell added.

In the third quarter, the company expects seasonal demand improvements from the consumer and US federal government businesses, but the quarter is also generally a period of slower demand from large commercial customers in the US and Europe.

Dell said it believes a refresh cycle in commercial accounts is more likely to occur in 2010, with IT spending improving first in the U.S. The company said it continues to see pressure in the form of component costs and areas of aggressive pricing in the near term.

“This quarter again demonstrates the discipline with which we are managing our business and further strengthening our balance sheet,” Brian Gladden, Dell’s chief financial officer explained.

“The best path for Dell remains one focused on profitable growth, lower costs and smart use of working capital,” Gladden added.

By John Kennedy


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