Dell's Q2 profits rise on strong enterprise sales

Dell's revenues also rise on strong sales of servers and storage and networking products

Dell on Thursday saw growth in net income and revenue for the second quarter of 2011, driven by strong growth in its enterprise hardware and services businesses.

On a GAAP (generally accepted accounting principles) basis, net income for the quarter ended July 30 was US$545 million, a 16 percent rise from the $472 million reported during the second quarter of last year. Earnings per share were $0.28.

The company reported revenue of $15.5 billion, a 22 percent increase from the year-ago quarter. The company's revenue beat the consensus estimate of $15.2 billion from analysts polled by Thomson Financial.

Revenue in the BRIC -- Brazil, Russia, India and China -- countries accounted for 12 percent of Dell's overall revenue, and was up by 52 percent.

There was no dramatic slowdown in demand for the company's products in Europe, said Brian Gladden, chief financial officer at Dell, during an earnings call to discuss the financial results.

Demand for enterprise offerings, including servers and network, storage and services products, increased worldwide during the quarter as companies refreshed IT infrastructures, the company said in a statement. There was also growth in the company's laptop and desktop revenue.

Server and networking revenue grew by 35 percent to $1.89 billion, driven by strong growth in blade shipments. Storage revenue grew 13 percent to $624 million, and services revenue increased 57 percent to $1.9 billion.

The refresh of PCs in enterprises led strong growth in the company's commercial client business. Overall revenue from mobility products -- which includes laptops -- was $4.7 billion, up by 21 percent, while desktop revenue was $3.87 billion, up 17 percent.

The corporate client refresh cycle is just beginning and will continue over the next 24 months, company officials said. A primary driving factor for the client refreshes is increasing demand for Microsoft's Windows 7 operating system.

Consumer revenue, on the other hand, was flat at $2.9 billion, the company said.

"We did see some demand weakening ... during the latter part of the quarter," Gladden said. But the consumer business should gain steam as the holiday quarter approaches toward the end of the calendar year.

Over the past six to eight months PC prices have remained stable, and PC pricing in the next few months will vary from country to country, Gladden said. Component pricing was a significant catalyst in stabilizing overall prices and will remain key in determining future PC prices.

The company has new consumer products planned for later in the year, said Michael Dell, the company's CEO. He did not detail the products, but said the company is backing Google's Android OS.

In May, Dell started shipping its Streak handheld device, a tablet with voice features. It runs on Android and has a 5-inch screen.

The company recently took a few steps to boost its enterprise offerings. The company this week agreed to acquire virtualized storage provider 3PAR for about $1.15 billion. In July it acquired Scalent, a provider of server-virtualization management software, and Ocarina Networks, a storage vendor.

The company is having success in attaching "sticky" services like ProSupport to its enterprise offerings, said Steve Schuckenbrock, president of the Large Enterprise division at Dell.

The company wants to be more than just a hardware reseller, Schuckenbrock said. The recent acquisitions are intended for the company's offerings to go hand-in-hand and are helping ease installation, management and provisioning of enterprise hardware.

"More and more we are in the heart of the data center," Schuckenbrock said.

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Agam Shah

IDG News Service
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