Dell profits swell on back of biz refresh cycles

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Dell profits swell on back of biz refresh cycles

Microscope contributor

Falling components prices and the continued tech refresh cycle helped Dell nearly triple profits in the fourth quarter though sales fell below analyst expectations.

The Texan PC giant pushed up revenues for the period by 5% to $15.7bn as profits grew to $927m from $334m a year earlier. For the fiscal year, turnover was $61.5bn, up 16% with the bottom line climbing 84% to $2.6bn.

The challenging pricing environment Dell called last quarter did not materialise allowing the firm to make the most of cheaper LCD and memory prices, Brian Gladden, CFO said on a conference cal last night.

"Generally we saw overall a very favourable component environment in the fourth quarter," he said.

However, the shift to higher margin enterprise kit and efforts to improve the supply chain - outsourcing production to contract manufacturers and shipping nearly half of PCs with fixed configurations - also weighed in, Dell added.

The Large Enterprise unit grew 12% to $4.7bn including a 14% rise in server shipments, a 1% rise in Dell services, and a 20% rise in PCs, "we continue to see a strong refresh cycle" said Gladden.

Two thirds of Dell's gross margin now comes from servers, storage, networking, services, software and peripherals, "the epicentre of the company has really shifted in terms of profitability ...away from the PC," said boss Michael Dell.

The "challenging customer dynamics in Europe" made for a mixed environment in the Public business unit, with turnover rising 4% to $4bn but SMB had its best turnout in two years as revenues hit $3.7bn, up 12%.

However, the Consumer division fell 8% to $3.3bn against a relatively strong year ago period with Windows 7 driving shoppers to replacing aging PCs.

Asked if it could maintain its gross margins, which went up 150 basis points in the last two quarters, Dell said it was confident it could if the changes to supply chain, progress in the sales execution and demand environment continued.

"I would like to emphasise that for us, profit growth is more important than unit growth, and that will be the defining philosophy that we use here," said boss Michael Dell.

Related Topics: Desktop PCs, VIEW ALL TOPICS

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