Dell executives say they expect business sales of Windows 7 PCs to boost sales in the company's fiscal fourth quarter, while reporting that third-quarter revenue fell 54 percent from a year ago. However, one analyst predicts that a PC price war will break out as Dell moves aggressively to take market share away from major competitors such as Hewlett-Packard and Lenovo.
reported fiscal third-quarter 2010 revenue of $12.9 billion, a slim
sequential improvement over second-quarter
revenue of $12.8 billion.
However, it reported that third-quarter net
income was $337 million, a substantial drop from the $727 million it earned in
same quarter a year earlier.
Brian Gladden, Dell's chief financial officer, said during the Nov. 19
earnings conference call that the quarter's results were "showing some
encouraging signs for us, especially in our large enterprise and SMB
businesses, where we had sequential growth for the first time in seven
Large enterprise revenue was $3.4 billion, up 4 percent from the second
quarter, though down 23 percent from a year ago, and small and midsize business
revenue was $3 billion, up 5 percent sequentially, although down 19 percent
year over year. Consumer revenue was $2.8 billion, which was consistent with
the previous quarter, though down 10 percent from a year earlier.
Driven, in part, by Microsoft's
launch of Windows 7
on Oct. 22, Gladden said he expects Dell to continue to
see growth in the fourth quarter. "We built more backlog than normal due
to [Windows 7's] late-quarter release, and the order dynamics that we saw
during the end of October," Gladden said. He explained that customers "were
waiting to see how the launch went. We built a little backlog as a result, and
we'll ship that in the fourth quarter."
He added that while in the past he's used the word "stabilizing"
to describe the current computer industry business cycle, Dell is now seeing
"positive signs that growth is coming back."
Michael Dell, the company's chairman and CEO,
agreed in a statement. "We are seeing improvement in overall underlying IT
demand that is continuing into the fourth quarter. The same is true with
momentum in Dell's business, specifically in our Large Enterprise and SMB
segments," the statement said.
Gladden emphasized that over the past four quarters the company has
increased cash flow, while cutting costs, a move he called a "never-ending process to drive to cost
Gladden additionally repeated that the majority of Dell's business products
are business-to-business, and that the current difficult economy is now
primarily being driven by consumer demand. Both executives said during the call
that in the coming year they expect enterprises to begin refreshing older
models with PCs running Windows 7.
John Spooner, an analyst with Technology Business Research, commented in a
statement on Dell's earnings that TBR expects Dell's return to aggressive
market-share growth in 2010 to spark a PC price war as businesses begin
"Despite lackluster business PC and server unit sales numbers in its
3Q09, TBR expects Dell to leverage its recent cost cuts ... to fund aggressive PC
and server pricing during the expected corporate PC upgrade cycle in
2010," Spooner wrote.
"We believe Dell has been laying the groundwork for this move for some
time. In fact, it will leverage its lower costs to provide aggressive hardware
pricing to large enterprise customers in order to win in large bid situations.
At the same time, Dell will gain the opportunity to attach additional items,
including its storage and newly acquired Dell/Perot Systems services, with
large PC and server deployments."
On Sept. 21, Dell
announced that it had acquired Perot Systems,
the IT services solutions company founded by two-time
presidential hopeful Ross Perot, to enable it to offer a broader range of IT
services and solutions.
Spooner wrote that TBR expects Dell to leverage its bundle of capabilities,
including software, storage and services, to increase the profitability of each
sale. "TBR believes Dell is moving in this direction because it believes
that the pipeline of opportunity is very strong now, and will continue to build
along with the improving economic situation throughout the world," he
Dell's other recent developments have included the Oct. 27 introduction of
XT2 XFR, a rugged convertible tablet
for enterprise verticals such as the military, field service and
factory fulfillment, and the Nov. 5 introduction of the Dell
Adamo XPS, an envelope-pushing, highly designed laptop geared toward consumers.
Both devices are said to be the thinnest in their respective classes.
And reaching for still another market-on Nov. 13, Dell
introduced its first smartphone, the Dell Mini 3,
and announced that Android-running device would be
available on China Mobile and Brazil's Claro network.