Dell Pleased with Q210 Revenue, Tightlipped About China Mobile Smartphone

Analysts were optimistic about Dell's second-quarter fiscal year 2010 results, and indeed, during a call to media and analysts on Aug. 28, the Texas company announced net revenue of $12.8 billion, which was up from the $12.3 billion of the previous quarter-though it couldn't touch the $16.4 billion of the same quarter a year earlier.

"We delivered quarter-to-quarter revenue growth, good profitability and very strong cash flow," said Brian Gladden, Dell's chief financial officer. "Product shipments, revenue, operating income, gross margins, earnings per share and cash flow were all higher than they were in the first quarter."

Storage and servers are two particular aspects of its business that Dell would like to grow, and Gladden reported, "We further strengthened our enterprise position in the quarter, with server revenue up sequentially 9 percent and unit shipments of servers increasing 12 percent versus the first quarter." Dell's EqualLogic storage systems were up 42 percent year-over-year.

Gladden was less forthcoming on a topic many are likely more curious about: the Mini 3i smartphone prototype that Dell has developed for China Mobile. In answer to a reporter's question about the smartphone, he stated:

"We showed a proof of concept prototype at the event with our partners China Mobile, who obviously we've had a relationship with. We've sold netbooks that are broadband-enabled.  And we really don't have any further details to share at this time. We will continue to explore opportunities across multiple screen sizes, we've said that. From our standpoint, it's a natural extension of what we do. We have significant relationships with the carriers, across the world. And the extent that it makes sense for us to participate with them with various devices, we'll do that. But other than that, we're not going to spend a lot of time on it. From our standpoint, we're spending an awful lot more energy on the enterprise side of our business than launching phones."

Gladden declined to comment on whether the phone might appear outside of China, as well as on the tablet market that its "Cupertino neighbors" are rumored to be joining soon.

The bulk of Dell's revenue, or $3.3 billion, came from its desktop PC business. Mobility accounted for $3.9 billion, and software and peripherals earned the company $2.4 billion. The bottom three categories were servers and networking, which accounted for $1.4 billion; enhanced services, which accounted for 1.2 billion; and storage, which brought in $551 million. Each of these categories, again, was up from the previous quarter but below numbers from the same quarter a year ago.

Dell said it plans to continue building its presence in emerging countries, and that revenue from BRIC countries-Brazil, Russia, India and China-grew 16 percent sequentially and now accounts for 10 percent of the company's total revenue.

Gladden and CEO Michael Dell said that they expect the second half of the year to be stronger than the first half, and for PC sales to increase next year as more enterprises refresh machines that are running the nearly 8-year-old Windows XP software.

"What I would encourage you to do is go to Dell.com, buy a modern PC, put Windows 7 on it, put Office 2010 on it, and you will love your PC again," Dell said.

"As more and more people do that, I'm here to tell you, there's going to be a refresh cycle next year. It's not all going to come in the first month or the second month, but over the course of the year, there will be a big refresh cycle."

Prepared notes from the company stated that the expected refresh cycle "remains predicated on an improving economy and related improvements in customer profits and government tax receipts."