Dell Reports Strong Profitability in Third Quarter

Date : 11/15/2011

  • Earnings per share of $0.49 (GAAP) and $0.54 (non-GAAP) up 17 and 20 percent, respectively; Operating Income up 12 percent (GAAP); up 10 percent (non-GAAP)
  • Enterprise solutions and services revenue at all-time high of $4.7 billion
  • Cash flow from operations for the quarter was $851 million and $5.2 billion for the past four quarters

Dell’s continued strategic focus on higher-value opportunities, combined with an increased mix of enterprise solutions and services sales, resulted in increased profitability on revenue of $15.4 billion in its third quarter, flat compared with revenue a year ago.

“Our results this quarter and over the past year reflect a new Dell, one focused on providing our customers productivity-enhancing solutions either developed organically or acquired,” said Michael Dell, chairman and CEO. “We’re now investing in research and development activities at almost a billion-dollar annual run rate and our earnings per share is up 86 percent over the last 12 months.”

Revenue for Dell’s enterprise solutions and services business – including sales of servers, storage, networking, and services – increased 8 percent over the same quarter last year to $4.7 billion, an all-time high. As the revenue mix steadily shifts more to the higher-value enterprise portfolio, Dell is delivering on its commitment to improve profitability, with operating income up 12 percent for the quarter and at 7.6 percent of revenue for the fiscal year to date.

“We delivered strong third-quarter results, maintaining our focus on operating income and improving our mix of higher-value enterprise solutions,” said Brian Gladden, Dell chief financial officer. “Consistent with our strategy and the investments we have made, we continued to see excellent momentum in our enterprise business, with double-digit revenue growth in services, servers and networking, and in key growth countries, despite some macroeconomic uncertainty.”


  • Revenue in the quarter was $15.4 billion, flat compared with the same quarter last year.
  • GAAP earnings per share was 49 cents, up 17 percent; non-GAAP EPS was 54 cents, up 20 percent.
  • GAAP operating income was $1.1 billion, or 7.4 percent of revenue. Non-GAAP operating income was $1.3 billion, or 8.4 percent of revenue.
  • Cash flow from operations was $851 million for the quarter and $5.2 billion over the last four quarters. Dell ended the quarter with $16 billion in cash and investments and repurchased $600 million in stock in the quarter. For the year, Dell has spent $2.18 billion to purchase 142 million shares of Dell stock.

Fiscal-Year 2012 Third Quarter and Year-To-Date Highlights

                                                                          Third Quarter              Fiscal Year-to-Date

(in millions) FY12 FY11 Change FY12 FY11 Change
Revenue $15,365 $15,394 0% $46,040 $45,802 1%
Operating Income (GAAP) $1,142 $1,024 12% $3,500 $2,288 53%
Net Income (GAAP) $893 $822 9% $2,728 $1,708 60%
EPS (GAAP) $0.49 $0.42 17% $1.46 $0.87 68%
Operating Income (non-GAAP) $1,288 $1,167 10% $3,992 $2,863 39%
Net Income (non-GAAP) $983 $875 12% $3,039 $2,088 46%
EPS (non-GAAP $0.54 $0.45 20% $1.62 $1.06 53%

Information about Dell’s use of non-GAAP financial information is provided under “Non-GAAP Financial Measures” below. Non-GAAP financial information excludes costs related primarily to the amortization of purchased intangibles, severance and facility-action costs, certain settlement costs and acquisition-related charges. All comparisons in this press release are year over year unless otherwise noted.

Strategic Highlights:

  • Enterprise solutions and services revenue was $4.7 billion in the quarter and represented 31 percent of Dell’s revenue.
  • Server and networking revenue increased 13 percent year over year, driven by continued momentum in server virtualization. Dell is working with customers to provide mission-critical services and solutions around the server, creating competitive differentiation, richer configurations and stronger profitability.
  • Dell-branded storage revenue grew 23 percent year over year, driven by demand for EqualLogic and Compellent technology.
  • Dell Services revenue grew 10 percent to $2.1 billion and now represents 14 percent of Dell’s business. Dell’s total value of new services contracts signed for the past 12 months is $1.9 billion. Services backlog is now $15.5 billion, up 11 percent from a year ago.

Business Units and Regions:

  • Large Enterprise had $4.5 billion of revenue, up 4 percent from a year ago on a 19 percent increase in revenue for servers and networking and a 14 percent increase in revenue for services. Enterprise solutions and services revenue was $1.9 billion. Operating income was $441 million, or 9.8 percent of revenue.
  • Public had $4.4 billion of revenue, down 2 percent from a year ago, and including an increase in services revenue of 7 percent. Operating income was $463 million or 10.6 percent of revenue. Enterprise solutions and services revenue was $1.6 billion. Spending was slow in U.S. federal and Western Europe. Customers continue to invest in our solutions to reduce spending and increase productivity.
  • Small and Medium Business had revenue of $3.7 billion, up 1 percent. Operating income was $386 million or 10.4 percent of revenue. Enterprise solutions and services revenue was $1.1 billion, an all-time high, and up 18 percent, driven by a gain in servers of 18 percent; services of 23 percent, and storage of 9 percent.
  • Consumer revenue was $2.8 billion, a 6 percent decline. Operating income was $76 million or 2.7 percent of revenue. The migration to higher-value products has proven to be effective, with overall company revenue for the high-end XPS consumer laptop growing 207 percent. XPS revenue now accounts for nearly 20 percent of Dell’s total consumer laptop business.
  • Internationally, revenue in growth countries – defined as those outside the U.S., Canada, Western Europe and Japan – grew 11 percent in the third quarter and is up 14 percent for the fiscal year. These geographies account for 29 percent of Dell’s revenue. Regionally, Asia Pacific and Japan had the greatest revenue growth at 10 percent, led by China’s 23 percent growth and Australia/New Zealand’s 13 percent increase. EMEA revenue increased 4 percent. Revenue in European growth countries increased 12 percent, led by the Czech Republic, Poland and Russia. Revenue in BRIC countries increased 14 percent.

Company Outlook:

Dell has delivered $5.3 billion in operating income on a trailing, 12-month basis, and a 44-percent increase year-over-year on a non-GAAP basis. The company remains committed to its strategy and is on track to exceed its guidance of 17 to 23 percent full fiscal-year operating income growth.

Given the uncertain macroeconomic environment and complexity in working through the industry-wide hard drive issue, the company is trending to the lower end of the range of its revenue outlook of 1 to 5-percent full fiscal-year growth.

Results through Q3 show that Dell is on track for another outstanding year. The company has made significant progress in building a more diversified and competitive set of enterprise and services-focused businesses that now represent almost 50 percent of its margin.


Dell Drops Proprietary Parts: XPS 630

Dell, long dinged for using proprietary hardware in its gaming PCs, has seen the light. The company said such annoying traits such as proprietary motherboards and power supplies is now a thing of the past.

The first XPS to shed the proprietary hardware will be the new budget XPS630 gaming machine. Based on the nForce 650 ichipset, Dell claims you can swap the board, PSU out for any other ATX-spec hardware.

The change is a long overdue. In the past, Dell has used designs that looked ATX-like but were actually not. If you tried to swap the power supply in your Pentium III Dimension XPS B 733R years ago, you would have been greeted by charred motherboard as the company actually wired its PSU’s differently than the industry but did not key them differently. For years, PC Power and Cooling has made small side business selling Dell upgrade PSUs. More recently, the company has been called out over BTX support and even using a proprietary power plug in its more recent XPS gaming rigs.

Why the use of proprietary designs? Cynical observers have said the company was just trying to lock customers into buying parts exclusively from Dell. The company has long defended the practice by saying that the variations from spec were because its engineers found the specs to be lacking. But the heat from critics and machines such as Hewlett-Packard’s Blackbird 002 going all ATX apparently have forced Dell to see the light. Company officials said the mantra in Dell engineering is that varying from the spec’s must be avoided at all costs.

The change from proprietary parts won’t be the only new trick for the XPS630 though. Dell has taken a page from Hewlett-Packard and claims the XPS 630 will support either Nvidia’s dual-card SLI or AMD’s dual-card CrossFire cards. How can Dell do this? Maximum PC spoke to AMD graphics officials who said the capability is being offered only to select OEMs who take the responsibility for making sure the drivers fully work with the BIOSes on the motherboards.

So why not just release such a driver to the public to let any nForce-user run CrossFire? The company said it is worried that a certain company could affect the performance of its cards when CrossFire is run on an SLI board so public support just isn’t going to happen. In the case of Dell and HP, AMD feels both have enough influence to keep performance problems from cropping up on their systems. For now, the CrossFire support is only through drivers obtained directly from Dell.
Dell says the XPS 630 will also be the first tier one OEM system to support Nvidia’s Enthusiast System Architecture. In the XPS 630’s case, ESA will let the user control the lights in the system. ESA support for the PSU or other components will not be initially supported.

The $1,300 version of the XPS 630 will ship with a 2.4GHz Core 2 Quad Q6600, GeForce 8800GT and a 750 watt power supply. Dell said the BIOS on the XPS 630 will support overclocking and is upgradeable to both dual and quad-core Intel Penryn CPUs.

Dell Studio Replacement Parts

Dell Studio Laptop Hard DriveDell Studio series is the mid priced Dell laptops that are priced above the Inspiron range but less than the more professional XPS range. The configuration too is on a higher side compared with the Inspiron range and on a lesser side compared with the Dell XPS range. The difference primarily lies in the parts like slot loading optical drives, better and more creative cover design options, media keys, backlit keyboards, LED backlit screens, HDMI and eSATA ports and faster and more advanced processors. Dell introduced the Studio series with Studio 15, Studio 17 and Studio Hybrid models. Later they also launched several studio models in desktop versions and desktop hybrids that featured laptop parts in desktops. However, due to low sales of hybrids they stopped selling them. And when they stopped selling them, most of the Dell studio hybrid parts were also taken off Dells online stores shelves. You can always buy Dell Studio parts on Dells website through the official store but then there are also several other retailers that sell the same Dell studio replacement parts. Now the question here is that why should anyone buy Dell laptop parts from any other retailer when Dell does sell them and that too with an unquestionable mark of genuineness? Well, the answer here can surprise many. The reason why you should buy from other online retailers selling Dell Studio parts is that they also sell the same parts and that too at a much discounted price, at times as much as 50 percent. Well, that is bound to surprise many. The point here is that Dell charges more than others because they have a certain brand value and that helps them charge more for any Dell studio part. As against this, online retailers often buy the same Dell Studio parts from manufacturers in bulk quantities and therefore get huge discounts. These online retailers are happy to pass on a part of this discount to buyers to attract them and to increase their sales and maintain profitability. Almost every part of a Dell studio laptop and desktop is replaceable. You can buy and upgrade or replace hard disk and RAM. Change the screen, keyboard, the ROM drive, batteries, Bluetooth port, touchpad, motherboard, speakers, bottom base plastic, cooling fan, card reader and almost every other part. However, how does a smart buyer identify the real from fakes? Well, the easiest way is by asking the online retailer a few questions. Make sure that you ask about the replacement/repair policy also.