Dell's Net Income, Revenue Drop for Second Quarter
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.
Thu, August 27, 2009
IDG News Service — 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.
