Dell continued to post solid growth across its IT hardware businesses in its 2005 fourth fiscal quarter, meeting analyst expectations for quarterly revenue. However, a one-time charge caused a decrease in net income during the quarter, the company said Thursday.
For the period ended Jan. 28, Dell recorded US$13.5 billion in revenue, in line with the consensus expectation from analysts polled by Thomson First Call and up 17 percent from last year's fourth quarter revenue of US$11.5 billion.
Net income was US$667 million, down 11 percent from US$749 million in last year's fourth quarter. The decrease was due to a one-time charge of $280 million related to the U.S. American Jobs Creation Act, a recently passed law that allows U.S. companies for a limited time to invest earnings from overseas operations in certain U.S.-based activities at a favorable tax rate.
Under the law, Dell will be able to bring US$4.1 billion back into the U.S., said Kevin Rollins, Dell's chief executive officer, during a conference call following Dell's announcement. That money will be taxed at a rate of 5.25 percent, compared to the normal corporate rate of 35 percent, according to the law. Dell is required to take the charge in anticipation of the tax bill on the figure, he said.
The law requires companies to invest the money in activities such as research and development, marketing, and capital expenditures, Rollins said. The company has not specifically identified what it plans to do with the money but is in the process of putting together a plan, he said.
Without the charge, net income was US$947 million. Earnings per share without the charge were US$0.37, slightly higher than analyst consensus expectation of US$0.36 a share.
For the full fiscal year, the Round Rock, Texas, company posted US$49.2 billion in revenue, an increase of 19 percent from the US$41.4 billion recorded during its previous fiscal year.
Dell expects to record about US$60 billion in revenue during its 2006 fiscal year, which just began, Rollins said. This puts the company a year ahead of its plan to double its 2002 revenue figures by the 2007 fiscal year, he said.
The new target is US$80 billion in yearly revenue, and the company will outline how and when it plans to reach that goal at a meeting for analysts in April, Rollins said.
Shipments of all products worldwide increased by 19 percent compared to last year, which Dell said outpaced the rest of the industry excluding the company by 7 percent.
U.S. corporate buying was healthy in the fourth quarter, Rollins said. Shipments of servers to North America, Canada, and Latin America increased by 25 percent compared to last year, and notebook shipments were up 28 percent, he said.
Consumers were not as active in the fourth quarter, but consumers have probably tapped themselves out after phenomenal growth in purchases in previous quarters, Rollins said.
Dell increased the number of unit shipped in Europe, the Middle East, and Africa by 29 percent in the quarter. This was led by a 34 percent jump in notebook shipments and a 30 percent gain in enterprise products such as servers and storage, the company said in a statement. This growth allowed the company to narrow the market share lead of Hewlett-Packard Co. in this region, Dell said.
In Asia-Pacific and Japan, a sharp rise in notebook sales also paved the way for overall growth. Notebook shipments were up 29 percent and overall shipments rose 27 percent.
Dell expects worldwide shipments to increase even faster, 21 percent, in its first 2006 first fiscal quarter, compared to 2005's first fiscal quarter, generating quarterly revenue of US$13.4 billion. The first half of the calendar year is generally slower for hardware firms than the second half.
Rollins declined to comment specifically on the departure of HP Chairman and Chief Executive Officer Carly Fiorina, announced Wednesday. He did say that Dell sees "an unsettled environment" with the HP news and the recently proposed purchase of IBM's PC business by Lenovo Group that might work to the company's advantage in the coming year.