RealTime IT News

Servers, Printers Drive Dell's Growth

Dell continues to take market share away from its rivals and is showing no sign of slowing down, the company said Thursday during its second-quarter earnings report.

The Round Rock, Texas-based computer maker said its revenue was a record $11.7 billion for the quarter ending in July. Net income was $799 million, with earnings per share at 31 cents -- also a Dell record.

"The pricing environment has been the same. The key to our success was execution," CEO Kevin Rollins said during a conference call to analysts and press. "Our teams were keeping an eye on what was selling, and we went after the appropriate businesses. We have a good insight into the corporate business market and the purchase cycle."

Rollins said he did not see a sales slowdown in June or at the end of July in the same way that HP warned investors of today. Much of Dell's sales came from its enterprise and small-to-medium business customers, although the company said its back-to-school sales should be good, as well.

"Inventories went down in the past month or so. We told the Street about that," Rollins said. "My guess is that they can come down further. That is not to say that there is a problem. This just brings us more in line with seasonal cycles. We are profoundly different from other companies. We have a different business model, and we participate in different segments. To paint the entire industry with one brush would be dangerous. The market should not value every company the same."

Dell said demand for its servers and printers were especially high during the quarter. The company saw a 31 percent increase in server shipments in Q2. The company said it is on tap to introduce a new, eighth generation of PowerEdge servers, which feature more powerful processors and enhanced systems-management software.

Likewise, revenue from software and peripheral products increased 31 percent, due to a strong demand for Dell printers. Those products are being introduced in more countries, including Japan during the second quarter and China in Q3. The company said it expects to sell five million printers during fiscal 2005, up from an original target of four million. Dell's overall printing and imaging business is now at a $1 billion annual run rate.

Dell's success also included a lot of overseas sales. The company said its Q2 shipment growth in Europe, the Middle East and Africa was 30 percent. Research firm IDC's numbers support Dell's claims that it shipped product 12 points higher than the average of rivals like IBM and HP in the region. Among its highlights, Dell saw a 44 percent rise in server shipments, and a 60 percent increase in total storage revenue.

The Asia-Pacific markets, including Japan, showed a similar trend, with shipment growth of 28 percent and server volumes in the region up 33 percent.

The company has had a tougher time in the over-saturated American market, adding nearly two points to its U.S. market share. Dell said total demand by large corporate and small and medium business customers increased 21 percent. Volume outside the U.S. rose 25 percent, led by strong growth in Canada.