Dell Ends Good Fiscal Year, But Outlook is Cloudy

By Chris Preimesberger  |  Posted 2012-02-21 Print this article Print

Dell Q4 profits dropped 18 percent, based mostly on falling revenue from the consumer PC market. All the major PC makers are facing the same sales issues as tablets, led by Apple's iPad and Android devices from several manufacturers, replace notebooks and laptops in users' homes and offices.

Dell had good news and not-so-good news for its shareholders on Feb. 21, reporting record yearly revenue and ROI for its investors in its fiscal year-end earnings report but also ceding that its profit margins have slipped.

In fiscal year 2012, the company banked a record $61.1 billion in revenue, including a record $18.6 billion in software and service sales -- a 30 percent upsurge from the previous year.  Its $2.13 earnings-per-share result also was a record for the company, Chief Financial Officer Brian Gladden told journalists and analysts on the quarterly earnings call.

On the other hand, Dell fourth-quarter profits fell 18 percent, based mostly on falling revenue from its consumer PC division. All the major PC makers are facing the same sales issues as tablets, led by Apple's iPad and Android devices from several manufacturers, replace notebooks and laptops in users' homes and offices.

Dell, a full-service IT hardware/software/services company which is slowly but clearly morphing its business model to one that relies less on selling notebooks and laptops, reported earnings of 51 cents per share on $16.01 billion in revenue for its fiscal fourth quarter.

Interestingly, Dell's desktop computer group reported that its sales were up 3.2 percent on the quarter, after falling into the red the previous quarter.

Overall, the numbers didn't beat projections by analysts polled by Thomson Reuters, who had advised their clients that Dell would post earnings of 52 cents per share.

The Austin, Texas-based company ended Q4 of its fiscal year with $18.2 billion in cash, net of having to spend $2.7 billion to buy back some of its own stock during the quarter.

Storage Divisions Lead the Way

Most of Dell's success in IT hardware emanated from its storage and data center equipment divisions, namely EqualLogic and Compellent -- new-age storage companies Dell acquired in 2007 and 2010, respectively. Gladden said Compellent had recorded substantial 60 percent growth in its first year under Dell's ownership and that EqualLogic's business had jumped 33 percent.

Both storage divisions produce virtualization-aware, secure and scalable storage for on-site or cloud-based IT systems. EqualLogic and Compellent systems are most often deployed in large enterprises, remote offices or midrange companies.

"Our customers think of Dell in much broader terms now, trusting us with their comprehensive IT needs, from the data center to the device," Dell Chairman, CEO and founder Michael Dell said.

Dell's Q1 2013 outlook isn't quite as optimistic. The company said its expects first-quarter revenue to slip 7 percent year-over-year to approximately $14.9 billion. Analysts polled by Thomson Reuters expect Dell to report revenue of $15.17 billion and earnings of 47 cents per share.

Dell's stock price fell 4.8 percent to $17.34 in after-hours trading after closing up slightly at $18.21.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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