Recovery Has Started for Dell, Says CEO

It was a tough year for Dell, with earnings off 42 percent in 2009 and sales down 13 percent, but the company feels it has turned the corner and its business is ramping up across all lines.

The company reported net income of $334 million, or $0.17 cents per share, compared with $351 million, or $0.18 cents per share a year ago. On a non-GAAP basis, which excludes one-time charges related to the acquisition of Perot Systems, Dell would have posted EPS of $0.28. A survey of analysts by Thomson Financial expected EPS of $0.27. Analysts exclude one-time items from their estimates.

Sales rose 11 percent year-over-year to $14.9 billion, with some business units doing better than others. Dell’s commercial business sales to large businesses and corporations rose 11 percent, while SMB rose 13 percent and consumer rose 25 percent.

Dell (NASDAQ: DELL) Senior Vice President and CFO Brian Gladden attributed the uptick to a number of factors, including the long-awaited refresh cycle as old computers are being replaced spurred by the appeal of Windows 7.

CEO Michael Dell, also on the call, added that “the age of the installed base is significant and customers see a refresh as a productivity enabler.”

Dell will continue to invest to grow its services business, which now constitutes 13 percent of company revenue. The addition of Perot Systems appears to be drawing in more customers because Dell is now seen as a solution provider, not just a box provider.

“One of the things we are seeing is an increased win rate in a number of parts of the business as our solutions capability, both real and perceived, have substantially increased here,” he told the conference call with analysts on Thursday.

Sitting on $11.3 billion in cash

Dell’s optimization project has also yielded big results, and the company has no plans on quitting that. Last year the company announced plans to cut $4 billion from its expenses by the end of fiscal 2011, which would be January 2011, but it’s already at that goal. Dell is now sitting on $11.8 billion in cash.

“Ongoing competitive pressure and economic realities never stop and we can’t, either,” Dell said on the call. Dell has already saved $3.9 billion and “we are already ramping the next phase of our ongoing cost initiatives. This journey does not end.”

Dell has consolidated its manufacturing facilities from 11 to 6 and cost-optimized the building of 66 percent of its business client computers and 90 percent of its consumer platforms. Michael Dell said the company would focus on further reducing product complexity, simplifying the supply chain and enhancing online sales through

The consumer business was both a blessing and a curse. It moved a lot of product but was the most competitive and price-sensitive and ate into Dell’s margins. Despite being a $12 billion business for Dell in fiscal 2010, it provided only $101 million in profit to Dell’s $1.4 billion in net income for the fiscal year. Still, Dell has a huge retail presence now, with 56,000 stores carrying Dell products.

The BRIC countries – Brazil, Russia, India, China – drove big profits. Sales in China and Brazil rose 70 percent and BRIC now accounts for 11 percent of Dell revenue. Gladden said 48 percent of Dell’s income now comes from outside the U.S.

The two executives declined to give projections for the first quarter, except to say that the overall industry is expected to be down about 10 percent sequentially in the first quarter, but Dell expects to do better than that.

Andy Patrizio is a senior editor at, the news service of, the network for technology professionals.

News Around the Web