Dell reports lower 3rd quarter profit
Nov 15, 2012 (Menafn - Austin American-Statesman - McClatchy-Tribune Information Services via COMTEX) --The global slump in personal computer sales weakened Dell Inc.'s third quarter financial results, the company reported Thursday.
The Round Rock-based computer maker reported revenue of 13.7 billion, down 11 percent from a year ago, and net income of 475 million, down 47 percent. Earnings per share were 27 cents, compared with 49 cents a year ago.
The results were slightly below analysts' estimates.
"In a difficult global IT (information technology) spending environment, we saw solid proof points that demonstrate progress in our strategy," said Brian Gladden, Dell's chief financial officer. "A highlight has been the strong progress of our newly introduced servers, with our server and networking business up 11 percent. We're also encouraged by early interest in our new Windows 8 touch portfolio and the opportunities its creates for our commercial and consumer businesses."
The company -- which has about 14,000 employees in Central Texas -- said its enterprise solutions and services business expanded by 3 percent from a year ago to revenue of 4.8 billion. That segment of the business accounts for more than half the company's gross profit margin this year, Dell said.
But sales of mobility products -- mostly notebook computers -- totaled just 3.5 billion, down 26 percent from last year.
The company said it expects to see a challenging economic environment in the fourth quarter, which will continue to affect the company's results. But it expects to see revenue for the current quarter, which ends in January, expand by between 2 and 5 percent from the third quarter.
Analyst Roger Kay said Dell is still grappling with the slump in the personal computer industry as it steadily converts its business to becoming a full-range supplier of IT services, software and advanced hardware.
"They are five years into reinventing the company and maybe they are half done," said Kay, with Endpoint Technologies Associates. "In the meantime, you still have to go through the revenue collapse of the old business and have that dust settle before you can detect the green shoots of new growth."
Revenue declined in all business units and regions. Its large enterprise business revenue totaled 4.2 billion, down 8 percent from last year. Its public sector revenue totaled 3.8 billion, down 11 percent. Small and medium-sized business revenue totaled 3.3 billion, down 1 percent. And its consumer revenue was 2.5 billion, down 23 percent. Its operating income was 325 million for large enterprise; 352 million for the public segment; 349 million for the small and medium business segment; and a loss of 65 million for the consumer segment.
Its revenue in the Americas dropped 9 percent from a year ago, while Asia Pacific and Japan was down 11 percent and Europe and the Middle East was down 15 percent.
The company's cash flow from operations in the quarter was 1.3 billion and it ended the quarter with 14.2 billion in cash and investments.
The results were released after the close of the stock market in which Dell's shares closed at 9.56 a share, down 2 cents. In after-hours trading the stock price dropped another 15 cents, or 1.6 percent.
Dell was encouraged by its continued growth in servers and networking and said it continues invest in its personal computer business because it sees that as important in building long-term relationships with business customers as and "end-to-end" equipment supplier.
Analysts noted that Dell has lost ground in its PC business both among consumers and business customers in the current downturn.
Company president Steve Felice said Dell has generally avoided chasing after low-end computer sales, but added that it may start competing more aggressively in the future as it works to protect important relationships with business customers.
"There are clearly some places where we will defend our turf," Felice said. "The enterprise is important to us."
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