Dell Q3 Sales Surge Across The Board, Earnings Jump

Dell on Thursday reported solid quarterly revenue growth, with nearly 150 percent growth in earnings, thanks to strong global demand for its entire commercial portfolio of products and services as well as solid supply-chain execution.

For its 2011 third fiscal third quarter, which ended October 29, Dell reported revenue of $15.4 billion, up about 19 percent from the $12.9 billion the company reported for its 2010 third fiscal quarter.

Dell also reported income of $822 million, or 42 cents per share, up over 140 percent compared to last year's $377 million, or 17 cents per share.

Dell's server and networking business rose by 20 percent over last year to $1.8 billion. Its storage revenue was up 7 percent to $543 million, software and peripherals up 8 percent to $2.6 billion, mobility products up 16 percent to $4.9 million, and desktop PC business up 21 percent to $3.6 billion.

Dell also reported services revenue as up by 55 percent to $1.9 billion. However, that growth ignored the third quarter 2009 revenue of Perot Systems, which Dell acquired in the fourth quarter of 2009. If Perot's third quarter 2009 revenue was included, total services revenue growth this year would have been a much more modest 3 percent.

Dell's large enterprise business revenue rose 27 percent compared to last year to reach $4.3 billion. That included a 25-percent increase in enterprise solutions and services revenue over last year.

The company's public revenue, the vast majority of which came from the U.S., rose 20 percent to $4.4 billion, while small and medium business revenue rose 24 percent to $3.7 billion and consumer revenue rose a modest 4 percent to $3 billion.

Growth in the SMB part of its business came in part because of the continuing strength of Dell's direct sales model, said Stephen Felice, president of Dell's consumer and small and medium business.

"Our direct model gives us an advantage in the midmarket, and our clients regard us as a trusted advisor," Felice said.

A combination of direct and partner sales is helping propel Dell's growth in the enterprise market, said Michael Dell, chairman and CEO of the company which bears his name.

"Our PC and solutions portfolio continues to grow, as does our field and partner ability to deliver these solutions around the world," Dell said. "We believe we're well positioned to profitably grow."

Next: Storage Continues To Be A Highlight

Dell's EqualLogic storage business grew 66 percent over last year, and currently has a run rate of over $800 million, Dell said.

He declined to directly address a financial analyst's question about Dell's reaction to losing its 3PAR acquisition bid to HP or about how EMC's proposed acquisition of Isilon might impact his company. He did say that Dell continues to invest in the storage business, citing as examples its recent acquisitions of Exanet for CIFS and NFS storage technology and of Ocarina.

Dell also said that his company's 10-year relationship with EMC continues to evolve.

"We're focused on continuing to grow our storage business," he said. "For us, the measure of success is profitability, and we're working to grow (it)."

When asked about how virtual desktop or tablet PC trends might impact Dell's PC business during the current customer refresh cycle, Dell said the company is working hard to make virtual desktops a viable alternative to PCs, but is not seeing widespread adoption yet. "We'd like to," he said.

As for tablet PCs, Dell said his company is seeing enthusiasm from customers about the products. "We're coming out with tablets next year that will address commercial and consumer needs," he said.

Dell also said that his company is solidly focused on profitability, and not on gaining market share with low-margin products. A big part of that is continuing to emphasize solutions, he said.

"There will be shifts within the business as we index to more profitable businesses," he said.

Dell the company has leveraged its supply chain to cut the cost of doing business thanks to falling component costs and other savings.

For instance, Felice said, Dell has done much in terms of shortening delivery time of products from overseas by an average of a week even as it depends more on sea freight for its consumer business. Dell also cut costs in the third quarter by consolidating its consumer business into three brands: Inspiron, XPS, and Alienware.

Looking forward, Dell the company expects to see growth from the PC refresh cycle at large corporate accounts and from an increase in sales of enterprise products and services. As a result, the company expects full-year revenue to be somewhere around the midpoint of its previously-discussed growth of between 14 percent and 19 percent, while full-year non-GAAP operating income is expected to grow by between 28 percent and 32 percent.