by CIO Staff

Dell Exceeds Revenue, Earnings Forecast

Feb 17, 20063 mins

Dell Inc. exceeded revenue and earnings expectations in its fourth quarter, ended Feb. 3. 2006, helped by strong sales of enterprise products and services, the Round Rock, Texas hardware vendor announced Thursday.

Revenue came in at US$15.2 billion, a 13 percent increase over 2005’s fourth quarter. The consensus estimate from analysts polled by Thomson Financial had been for $14.8 billion.

Net income increased 52 percent to $1.01 billion, or $0.43 per share. Analyst had expected earnings per share of $0.41. In the fourth quarter, Dell reported identical net income and earnings per share figures on a GAAP basis and on a pro forma basis.

One area in which the company slipped was in customer satisfaction, which is a core attribute of its direct sales model, said Kevin Rollins, Dell’s president and chief executive officer, during a conference call.

“As a management team, we deem this unacceptable and have established aggressive goals and implemented programs designed to drive personal accountability across the entire organization,” Rollins said.

These steps include the opening of new global contact centers and increasing telephone and online support staff, he said. The company also is investing in the IT infrastructure of its Web site to improve its navigation, content and support features, Rollins said. The changes are expected to “establish a new and higher standard for customer satisfaction,” he said.

Revenue was also helped by an extra week of sales in the quarter, which had a stronger-than-expected impact of two or three extra percentage growth points, executives said.

Enterprise revenue, which comes from sales of storage systems, servers, services and related software and peripherals, rose 21 percent.

“In the enterprise, the trend is towards smaller, more powerful standardized systems where Dell is uniquely positioned,” Rollins said.

Storage revenue in particular increased 41 percent, they said. Dell shipped a record 10.2 million storage units in the quarter, a 15 percent increase. Meanwhile, server shipments increased 11 percent.

Imaging products’ revenue increased 17 percent, a growth rate the company wants to improve on, and it will thus take steps towards that goal, executives said.

Sales outside of the U.S. made up a record 43 percent of the company’s quarterly revenue.

For the full fiscal year, revenue was $56 billion, up 14 percent. Earnings per share were $1.46, a 24 percent increase. Net income grew 17 percent to $3.57 billion.

In the first quarter of 2007, Dell expects revenue to be between $14.2 billion and $14.6 billion and earnings per share in the range of $0.39 and $0.41, excluding an estimated $0.03 of stock compensation.

Executives were noncommittal when asked to comment about rumors that Dell will begin using chips from Advanced Micro Devices Inc. (AMD), saying Dell is always assessing technologies and that it doesn’t have an exclusive arrangement with Intel Corp. However, Dell sees no reason to start using AMD chips at this point, they said.

By Juan Carlos Perez – IDG News Service (Miami Bureau)