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Dell Ends Good Fiscal Year But Cloud’s On The Horizon

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Dell Q4 profits dropped 18 percent, mostly due to falling revenue from consumer PC sales as mobile device advances bite

Dell had good news and not-so-good news for its shareholders as it reported record yearly revenue for its investors in its fiscal year-end earnings report – but also ceding that its profit margins have slipped.

In fiscal year 2012, the company banked a record $61.1 billion (£38.7bn) in revenue, including a record $18.6 billion in software and service sales –  a 30 percent upsurge from the previous year. Its $2.13 (£1.35) earnings-per-share result also was a record for the company, chief financial officer Brian Gladden told journalists and analysts on the company’s quarterly earnings call.

PC sales depression

Dell’s fourth-quarter profits fell 18 percent, based mostly on falling revenue from its consumer PC division. All the major PC makers are facing the same sales issues as tablets, led by Apple’s iPad and Android devices from several manufacturers, replace notebooks and laptops in users’ homes and offices.

Dell, a full-service IT hardware/software/services company which is slowly but clearly morphing its business model to one that relies less on selling notebooks and laptops and more on data centre provisioning and Cloud, reported earnings of 51 cents (32p) per share on $16.01 billion (£10.14bn) in revenue for its fiscal fourth quarter.

Interestingly, Dell’s desktop computer group reported that its sales were up 3.2 percent on the quarter, after falling into the red the previous quarter.

Overall, the figures did not beat projections by analysts polled by Thomson Reuters, who had advised their clients that Dell would post earnings of 52 cents (33p) per share.

The Austin, Texas, company ended Q4 of its fiscal year with $18.2 billion (£11.5bn) in cash, net of having to spend $2.7 billion (£1.7bn) to buy back some of its own stock during the quarter.

Storage Divisions Lead the Way

Most of Dell’s success in IT hardware emanated from its storage and data centre equipment divisions, namely EqualLogic and Compellent –  new-age storage companies Dell acquired in 2007 and 2010, respectively. CFO Gladden said Compellent had recorded substantial 60 percent growth in its first year under Dell’s ownership and that EqualLogic’s business had jumped 33 percent.

Both storage divisions produce virtualisation-aware, secure and scalable storage for on-site or cloud-based IT systems. EqualLogic and Compellent systems are most often deployed in large enterprises, remote offices or midrange companies.

“Our customers think of Dell in much broader terms now, trusting us with their comprehensive IT needs, from the data centre to the device,” Dell chairman, CEO and founder Michael Dell said.

Dell’s Q1 2013 outlook is not quite as optimistic. The company said its expects first-quarter revenue to slip seven percent year-over-year to approximately $14.9 billion (£9.4bn). Analysts polled by Thomson Reuters expect Dell to report revenue of $15.17 billion (£12.28bn) and earnings of 47 cents (30p) per share.

Dell’s stock price fell 4.8 percent to $17.34 (£10.98) in after-hours trading after closing up slightly at $18.21 (£11.53).

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