Michael Dell pins Windows 8 hopes on consumer upgrades

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Michael Dell pins Windows 8 hopes on consumer upgrades

Alex Scroxton

Michael Dell has spoken of his hopes for the upcoming launch of Microsoft Windows 8, saying that although enterprise buyers were still in the process of upgrading to Windows 7 and would tend to hold off, there were early signs of a massive refresh in the consumer sector.

"We think [that] unlike other Windows transitions, this is a transition where you are generally going to need a new PC," said the eponymous CEO. "The addition of capacitive touch capability into Windows 8, we think, will be a welcome addition and [we] will have a full complement of products at the time of launch.

"The product refresh cycle associated with this release of Windows is likely to be very different," he said.

Dell was speaking to analysts on a conference call to mark the end of the first quarter of its fiscal 2013, during which the company revealed that its PC business contracted sharply, helping drive overall sales down by 4% year-on-year to $14.42bn (£9.17bn), while net profit fell 33% to $635m.

Brian Gladden, Dell CFO, explained: "Some of the tougher competitive environment can be attributed to channel inventory building, following the hard disk issues of the past two quarters. In addition we're seeing more consumer IT spending diverted to alternative mobile computing devices [and] these dynamics impacted both our revenue and margins for the quarter."

Brian Gladden, Dell CFO, explained: "Some of the tougher competitive environment can be attributed to channel inventory building, following the hard disk issues of the past two quarters. In addition we're seeing more consumer IT spending diverted to alternative mobile computing devices [and] these dynamics impacted both our revenue and margins for the quarter."

However, the firm's sub-par performance was not solely down to the headwinds battering the PC market, and Dell's management were candid in their criticism of the business' sales organisation, where execution was "below expectations" and progress towards Dell's aim of becoming a solutions-led business was going slower than anticipated, according to COO Stephen Felice.

"We've moved sales resources to better optimise coverage within specific customer sets and geographies. In addition, we're increasing our focus on integrated solution offerings rather than overspecialising on specific products, and emphasising a strong focus on our servers, storage and notebook products," he said.

Dell revealed that its servers and networking business had grown slightly, with a strong pipeline heading into Q2, and particular traction around its Force10 lines. Sales of IP storage were up 24%, with Compellent and EqualLogic both turning in a solid performance, although total storage sales declined 8% as the firm continued to drive third-party storage options out of its business model.

Servcies were a particular highlight, up 4%, and security was up 31% thanks to the recent SecureWorks acquisition, but software and peripherals, however, were down 7%, and the firm predicted "pruning" of some non-strategic product lines here.

By business unit, Large Enterprise saw sales slip 3%, with many customers delaying spend, and Public saw similar declines. SMB saw sales up 4% driven by enterprise services and solutions growth, and Consumer dropped 12%.

Gladden conceded that Dell had not got the year off to a particularly auspicious start, but said it was too early to adjust its outlook, and said Q2 sales would probably be in line with normal seasonality, up around 3% sequentially.

"We're fully committed to our strategy and we'll continue to make investments in building end-to-end solutions capability," he said. "This is a long-term strategy, and [it] will take time."

Conference call transcript courtesy: Seeking Alpha


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