Dell banks on growth outside the US in Q1

Dell reported strong results from business units located outside of the U.S. in the first quarter, leading to solid increases in revenue and net income on the back of solid growth in storage and mobile products, the company said Thursday.

First-quarter revenue was US$13.4 billion, up 16 percent from US$11.5 billion in revenue during last year's first quarter and meeting the expectations of analysts polled by Thomson First Call.

The increase in revenue was driven largely by a 21 percent increase in sales to businesses and consumers outside the U.S., said Kevin Rollins, chief executive officer, on a conference call following Dell's earnings announcement. Customers outside the U.S. now account for 42 percent of Dell's total revenue, he said. Shipments in Europe, the Middle East, and Africa increased by 26 percent compared to last year, while shipments in Asia-Pacific, including Japan, increased 27 percent.

Dell needs to stick to that 16 percent growth pace to reach its stated target of US$80 billion in yearly revenue by the end of 2008 or 2009. Rollins pointed to the company's efficient operating model and expanding global reach as two factors that will help it achieve that goal.

Net income was US$934 million, up 28 percent from last year when the Round Rock, Texas, company recorded US$731 million in net income. Earnings per share were $0.37, on target with analyst estimates.

Dell is trying to shed its PC-maker image and present itself as a more diversified IT vendor. The company's April analyst meeting focused mainly on emerging businesses like services and printers, both of which had an excellent quarter, Rollins said.

The company's services business recorded US$1.1 billion in revenue during the quarter, a 30 percent increase compared to last year, Rollins said. Services growth was even stronger outside of the U.S, he said.

Shipments of Dell-branded printers were up 77 percent compared to last year, Rollins said. The company now believes it has about 10 percent of the fast-growing color laser printer market, and about 18 percent of the inkjet market, he said.

Executives from Hewlett-Packard, the market leader in both of those categories, earlier this week characterized Dell's growth in printer market share as coming at the expense of profits. Rollins acknowledged that Dell's printer business only breaks even at present, but said that it has performed better than expected and predicted that the business will eventually generate profits.

Dell's core PC business had a solid quarter, in sync with recent industry trends of slow desktop growth and strong notebook growth. Desktop revenue increased 6 percent compared to last year, while revenue from mobility products was up 22 percent. The desktop PCs that made Dell an industry powerhouse are steadily shrinking as a percentage of the company's overall revenue. Revenue from desktops accounted for 40 percent of Dell's total first-quarter revenue, down from 44 percent last year.

At the April analyst meeting Rollins had expressed slight concerns about Dell's first-quarter PC business based on the results of February and March, but business picked up in April, he said Thursday.

For the second quarter, Dell expects revenue to run between US$13.6 billion and US$13.8 billion, an increase of between 16 percent to 18 percent from last year's second quarter. Earnings per share are expected to be between US$0.37 and US$0.39, the company said.

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Tom Krazit

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