Dell 3Q net income more than doubles

Question of the Day

Is it still considered bad form to talk politics during a social gathering?

View results

SEATTLE (AP) - Personal computer maker Dell Inc. said Thursday that its net income for the latest quarter more than doubled as companies spent more to replace aging technology.

Dell’s earnings topped Wall Street’s expectations, and investors drove its shares up almost 5 percent after the results were announced.

Businesses of all sizes, plus government agencies and other public-sector customers, spent more with Dell in the quarter. Large-enterprise revenue jumped 27 percent to $4.3 billion from a year ago, and small-and-medium-business revenue rose 24 percent to $3.7 billion.

While networking gear maker Cisco Systems Inc. recently reported unexpectedly slow growth in new orders from government customers, Dell said public-sector revenue rose 20 percent to $4.4 billion. However, Dell’s business with federal, state and local government accounts for just 9 percent of the public-sector business and 3 percent of the company’s overall revenue.

Revenue from consumers, Dell’s smallest customer segment in the quarter, increased 4 percent to $3 billion.

In an interview, Dell Chief Financial Officer Brian Gladden said the company expects to see similar “muted” growth through the holiday shopping quarter.

Desktop and laptop computers made up about 56 percent of Dell’s revenue in the quarter. PCs are less profitable than Dell’s technology consulting services and other smaller slices of Dell’s business, but the company still managed to improve gross margin _ a measure of profitability. Dell said lower component costs helped margins in the quarter, as did “pricing discipline” _ not cutting prices too deeply to attract buyers _ and improvements in the supply chain. The company said it also passed on some deals that could have hurt margins.

For the current fourth quarter, Dell indicated that gross margin would not be as strong. During a conference call with analysts, Gladden said less-profitable consumer PCs would make up more of the computers sold in the quarter. He also said component prices were bottoming out, and wouldn’t provide as much of a lift.

Analysts came back with question after question seeking more details about margins.

“They did a good job. I’m not taking any credit away from that,” said Kaufman Bros. analyst Shaw Wu in an interview. But, he added, “a lot of the supply-chain efforts have been ongoing for several years. All of a sudden, it is somewhat confusing that they show up this quarter.” Wu also questioned the effect of one-time accounting gains had on profitability in the quarter, in addition to the reasons Dell cited.

Rodman & Renshaw analyst Ashok Kumar was left wondering what level of gross margin to expect from Dell in the future.

“A lot of us are skeptics out there. Clearly the margin they delivered was good, but it’s not sustainable by any measure,” Kumar said.

For the fiscal third quarter, which ended Oct. 29, Dell’s net income jumped to $822 million, or 42 cents per share, from $337 million, or 17 cents per share.

Excluding a $72 million gain related to Dell’s failed bid to buy data-storage maker 3Par and other items, Dell earned 45 cents per share.

Analysts surveyed by Thomson Reuters expected Dell to earn much less _ 32 cents per share.

Story Continues →

View Entire Story

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Comments
blog comments powered by Disqus
TWT Video Picks