Dell triples quarterly profit as cloud and services deliver

18 May 2011

Technology giant Dell reported that its quarterly profit grew almost three-fold to US$945m from US$341m last year. Revenues were up 1pc to €15bn as strategic acquisitions in the area of cloud, services and security began to deliver.

“We’re off to a solid start in our fiscal year 2012,” chairman and CEO Michael Dell exclaimed.

“Our substantial profit increase demonstrates that our strategy is working and our execution is improving.”

Revenue for Dell’s commercial business improved 3pc to $12 billion, with record profitability. Commercial services revenue increased 6pc.

Enterprise solutions and services revenue grew 5pc to $4.4 billion in the quarter and represents 30pc of Dell’s consolidated revenue.

Servers and networking revenue increased 11pc.

Dell-owned storage technology, which includes Compellent, EqualLogic, PowerVault and DX Object Storage, grew 11pc in the quarter, offset by declines in EMC storage. The company’s overall storage business revenue declined 13pc. Dell closed the acquisition of Compellant during the quarter, has already developed a strong pipeline of business and is on track with integration plans for the period.

Dell Services revenue grew 5pc to $2 billion. Transactional support and outsourcing revenue were up 5pc and 3pc, respectively, while the project services business grew 13pc. Dell also added enterprise-class security capability in Q1 with the closing of its acquisition of SecureWorks.

The company expanded its global financing capability during the quarter with the announcement of its intent to acquire from CIT Dell Financial Services(DFS) Canada Ltd., as well as CIT Vendor Finance ’s Dell-related assets and sales and servicing functions in Europe.

Dell’s business units

Large Enterprise had record operating income of $504 million, or 11.3pc of revenue on $4.5 billion of revenue, up 5pc from a year ago. Enterprise solutions and services revenue was $1.8 billion, a 2pc increase. Revenue from desktop and laptop computers grew 7pc as the client refresh among large corporate accounts continued.

Public revenue was $3.8 billion, a 2pc decline resulting from weaker spending on desktop and laptop products. Enterprise solutions and services revenue was up 3pc Server revenues increased 9pc. Operating income for the quarter was $370 million, or 9.8pc of revenue.

Small and Medium Business had record profit in the quarter with revenue up 7pc to $3.8 billion, a two-year high driven by strong demand across all products and services. Operating income was $463 million, or 12.3pc of revenue. Enterprise solutions and services revenue was up 16pc, driven by a gain in servers of 19pc; services of 16pc, and storage of 7pc.

Consumer business struggles

Consumer revenue was $3 billion, down 7pc, as demand was softer than expected. However, profit significantly improved with operating income of $136 million, or 4.5pc of revenue, benefiting from a simplified brand structure that now includes an improved line of Inspiron, re-launched XPS, and Alienware products, a shift to higher value products, and structural and component cost improvements in the supply chain.

Revenue from growth markets (which excludes the U.S., Canada, Western Europe and Japan) grew 17pc and represents 27pc of total company revenue. Revenue from BRIC countries grew 18pc, with India up 28pc and China up 22pc.

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