Dell Reports Record Third Quarter Earnings

November 19, 2010 by | Comments

Global demand for all commercial products and services and solid supply-chain execution led to strong operating income for Dell in its third fiscal quarter, with GAAP operating income of $1.02 billion and record earnings per share of 42 cents. On a non-GAAP basis, operating income was $1.17 billion, or 45 cents per share.

The robust profit results came on a 19 percent increase in revenue to $15.4 billion, as commercial and enterprise sectors continue to be solid. Year to date, the company’s revenue has grown 21 percent to $45.8 billion.

Fiscal-Year 2011 Third Quarter Highlights

(in millions) FY11 FY10 Change
Revenue $15,394 $12,896 19%
Operating Income (GAAP) $1,024 $577 77%
Net Income (GAAP) $822 $337 144%
EPS (GAAP) $0.42 $0.17 147%
Operating Income (non-GAAP) $1,167 $740 58%
Net Income (non-GAAP) $875 $449 95%
EPS (non-GAAP $0.45 $0.23 96%

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, a merger termination fee, certain settlement costs and acquisition-related charges. All comparisons in this press release are year over year unless otherwise noted.

Results

  • Revenue in the quarter grew 19 percent and is up 21 percent year to date.
  • GAAP operating income was $1.02 billion, 6.7 percent of revenue. Non-GAAP operating income was $1.17 billion, 7.6 percent of revenue.
  • Cash flow from operations was $913 million, and Dell ended the quarter with $14 billion in cash and investments.


Strategic Progress:

  • Strong operating leverage across all commercial business segments led to record profitability, with operating income at 10 percent of revenue. Revenue for the commercial business was $12.4 billion, up 24 percent.
  • Enterprise solutions and services revenue, which includes Perot Systems, was up 31 percent. The company’s EqualLogic storage business grew 66 percent.


Business Units and Regions:

  • Large Enterprise revenue was $4.3 billion, up 27 percent from a year ago. Operating income was $400 million, or 9.2 percent of revenue. Enterprise solutions and services revenue was $1.7 billion, a 25 percent increase, and client revenue increased 38 percent. Dell introduced its new virtual integrated system (VIS) architecture and services that help customers transition new and existing technologies to open, cloud-like models that dynamically provision application workloads, and unify heterogeneous data center assets into a more efficient common pool of resources.
  • Public revenue was $4.4 billion, a 20 percent increase (including the integration of Perot). Operating income for the quarter was $451 million, 10.2 percent of revenue. State and local government business in the U.S. represents approximately 9 percent of the total Public business, less than 3 percent of Dell revenue, and was up 5 percent in the third quarter. Dell built on its leadership as the No. 1 technology provider to the health care industry with key customer engagements at The Methodist Hospital in Houston, Western Maryland Health Systems, and in China, Shanghai’s Songjiang Hospital, to implement Electronic Medical Record (EMR) systems and diagnostic image transfers that help improve productivity and reduce operating costs.
  • Small and Medium Business revenue was $3.7 billion, up 24 percent. Profitability was at a record high, with operating income at $391 million, 10.7 percent of revenue, up 39 percent from last year . In the quarter, Dell introduced new PowerEdge servers, PowerVault storage, and PowerConnect networking solutions that help small and medium businesses affordably update technology infrastructures with easy integration, minimal downtime and the ability to scale.
  • Consumer revenue was $3 billion, a 4 percent increase. The segment improved to break-even operating income in the quarter, despite muted consumer demand. Dell introduced a new family of XPS laptops in the third quarter, featuring exceptional sound, video and 3D-capabilities. The company streamlined its Consumer offerings to three brands: Inspiron, XPS and Alienware during the quarter.
  • Asia-Pacific and Japan revenue grew 29 percent, EMEA increased 15 percent and the Americas were up 18 percent. Revenue in Brazil, Russia, India and China (BRIC) grew 30 percent overall, led by a 55 percent increase in India. The company continues to expand its presence in these important countries, which now represent 13 percent of total company revenue.


Quotes:

Michael Dell, chairman of the board and chief executive officer: “Our strong results demonstrate that we are listening to customers and delivering what they want. It validates that our strategy to offer 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. Dell is growing in the right areas, and I’m very excited about our momentum.”

Brian Gladden, chief financial officer: “Our teams delivered outstanding results in the quarter. With solid demand in our commercial segments, we executed well and that led to record profitability for the company and especially in our important enterprise solutions and services business. We are pleased with our year-to-date revenue growth of 21 percent and non-GAAP operating margin of more than 6 percent. These results position us well for a very good financial year, and we remain focused on our commitment to deliver balanced revenue and operating income growth along with solid cash flow generation.”

Company Outlook:

The company expects to see continued strength from the ongoing client refresh among large corporate accounts and strong growth in enterprise products and services. Fourth quarter revenue is expected to track in-line to slightly up from the third quarter as commercial demand remains stable while consumer demand remains more muted. The company expects full-year revenue to track toward the mid-point of the 14-to-19 percent range set earlier in the year and non-GAAP operating income growth to be between 28 and 32 percent.

–(Press Releases)–

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