Dell Profit Falls 18% On Higher Expenses

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PC maker Dell Inc. (DELL) said Tuesday after the markets closed that its fourth quarter profit fell 18% from last year, as higher expenses more than offset a modest 2% increase in revenue.

The company's quarterly earnings per share, excluding items, also came in below analysts' expectations. At the same time, the Round Rock, Texas-based company gave a downbeat revenue forecast for the first quarter.

Dell shares are currently losing 4.56% in after hours trading after closing the day's regular trading session at $18.21, up 5 cents. The shares trade in a 52-week range of $$13.29 to $18.33.

Higher operating expenses and a modest revenue growth weighed heavily on Dell's earnings. GAAP operating margin for the quarter fell to 5.8% from 7.3% a year ago, while non-GAAP operating margin declined to 7.1% from 8.2% last year.

The company said growth countries outside of the U.S. and Canada, Western Europe and Japan increased revenue 8% year-over-year. Regionally, Asia Pacific and Japan had the greatest revenue growth at 10% for the quarter, led by China's 15% growth. The company's Americas revenue was down 3%.

The company's desktop PC revenue for the fourth quarter rose 3% to $3.7 billion, while its mobility revenue, which includes laptop PCs, grew 1% to $4.9 billion.

Worldwide PC shipments fell a bigger-than-expected 1.4% to 92.2 million units in the fourth quarter of 2011, according to preliminary results released last month by market research firm Gartner, Inc. (IT).

In the third quarter of 2011, China's Lenovo overtook Dell to become the world's second largest PC vendor for the first time and continued to maintain that position in the fourth quarter. Dell had lost the global PC lead to Hewlett-Packard Co. (HPQ) in 2006.

Dell's software and peripherals revenue for the fourth quarter fell 4% from last year, while server and networking revenue for the quarter rose 6%.

Dell is the world's third largest maker of server computers behind International Business Machines Corp. (IBM) and HP.

Services revenue for the fourth quarter increased 12% year-over-year, boosted by the acquisition of Perot Systems, while storage revenue fell 13% from a year earlier.

After losing the takeover battle for data storage firm 3PAR Inc. to larger rival HP, Dell acquired Compellent Technologies, Inc. In August, Dell completed its acquisition of Force10 Networks, which deals with high-performance data center networking.

For the fourth quarter, large enterprise revenue increased 5% year-over-year, while public revenue fell 1%. Small and medium business revenue for the quarter grew 6%, while consumer revenue fell 2%.

Dell was among the worst sufferers among the technology giants during the recession In order to drive growth, Dell resorted to acquisitions, cut thousands of jobs, closed plants and entered the smartphone market.

For the fourth quarter, the company reported GAAP net income of $764 million or $0.43 per share, compared to $927 million or $0.48 per share for the year-ago quarter.

Excluding items, non-GAAP net income for the fourth quarter fell to $913 million or $0.51 per share from $1.02 billion or $0.53 per share in the prior year quarter.

On average, 27 analysts polled by Thomson Reuters expected the company to earn $0.52 per share for the fourth quarter. Analysts' estimates typically exclude special items.

Revenue for the fourth quarter rose 2% $16.03 billion from $15.69 billion in the same quarter last year. Fourth quarter revenue grew 4% sequentially. Twenty-six analysts had a consensus revenue estimate of $15.96 billion for the fourth quarter.

Looking forward, the company said it expects first quarter revenue to decline about 7% sequentially, implying revenue of $14.91 billion. Analysts currently expect the company to post revenue of $15.18 billion for the first quarter.

However, the company said it expects fiscal 2013 non-GAAP earnings per share to exceed the record $2.13 it delivered in fiscal 2012. Analysts currently expect the company to earn $2.04 per share for the fiscal year ending January, 2013.

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