Dell's net income, revenue drop for second quarter

But the company expects a strong second half of the fiscal year with heightened demand for its products

Dell on Thursday reported a drop in net income and revenue during the second fiscal quarter of 2010, but said it anticipates that the global economy will improve and IT spending will be strong in the second half of this year.

The PC maker reported net income of US$472 million for the quarter ended July 31, a 23 percent drop from last fiscal year's second quarter. Earnings per share were $0.24, which beat estimates of $0.23 based on projections of analysts polled by Thomson Reuters.

Net income and revenue improved from the immediate prior quarter, Dell said. Net income grew by 63 percent from the first quarter of 2010, while revenue grew by 4 percent.

Dell reported revenue of $10.6 billion, a year-over-year drop of 22 percent and short of analyst expectations of $12.6 billion.

The company's revenue dove year-over-year across all segments, including the mobility market, which includes laptops, and in the desktop PC category. Mobility revenue was $3.9 billion, a 21 percent yearly drop, and recorded no sequential quarterly gains. Desktop PC revenue was $3.3 billion, a 33 percent yearly drop, but 5 percent growth sequentially.

CEO Michael Dell expressed optimism about the upcoming quarters. If current trends in demand continue, the company expects revenue will be better in the second half of the fiscal year than it was in the first, he said in a statement.

Desktop unit shipments were down 23 percent year-over-year, while laptop shipments were flat due to the weak environment and a change in Dell's product mix.

The company's profit margins on consumer products were affected by pricing pressure and the high cost of components.

Dell is focusing on profits, not market share, Michael Dell said during a conference call. "If we wanted [market share], we'd go and sell a whole bunch of netbooks," he said. Netbooks carry lower profit margins for vendors.

Instead Dell is relying on enterprise sales to increase its profit margins, the CEO said. Wary of the economy, companies have held back on purchases, but Dell saw demand for enterprise products stabilize during the quarter, he said. Product orders improved during July and August and could continue to rise into the upcoming months, he said.

Dell saw big revenue gains from its EqualLogic storage products in particular, the company said. EqualLogic revenue was up 42 percent year-over-year, though overall storage revenue was down by 19 percent.

"The EqualLogic platform is big for us," Dell said. During the quarter, the company launched the EqualLogic PS4000 iSCSI line of storage area networking (SAN) arrays for small businesses.

Dell already has a relationship with storage vendor EMC, but the emergence of EqualLogic won't hurt that relationship, Michael Dell insisted. EMC serves a different customer base looking to implement storage based on the Fibre Channel platform, he said.

The strong demand for enterprise products will continue into the next calendar year as IT administrators look to upgrade hardware, Dell said. The upgrades will be driven by new processors like Intel's Nehalem chips and the continued growth of server and client virtualization, he said. Upgrades in client hardware could be triggered by software like Windows 7, Microsoft's next OS due for release in October.

"We see a lot of old machines out there that are going to be replaced," Dell said. He admitted that assuming Windows 7 will be a big success could be risky, but early feedback is positive, he said. Some customers may also upgrade hardware for Office 2010, due in the first half of next year.

About 44 percent of Dell's revenue during the quarter was from outside the U.S., with the BRIC countries (Brazil, Russia, India and China) making up 10 percent. Revenue in those countries declined 17 percent from a year ago but was up 16 percent sequentially. Dell's revenue in the U.S. and the Asia-Pacific grew 11 percent sequentially, but revenue in Japan dropped 24 percent.

In July, the company said that demand for products was stabilizing. Dell also has undertaken a plan to cut costs by $4 billion by the end of fiscal 2011, a change from $3 billion in cost cuts it had announced in May.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags Dellrevenue

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Agam Shah

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Jack Jeffries

MSI GS75

As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr

MSI PS63

The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?