Hardware, Channel Sales Propel Dell's Q4 Revenue, Earnings

Dell, banking on the strength of its system and Dell-brand storage business, reported on Tuesday that its fourth quarter and full year revenue and profits grew at an enviable pace, with earnings per share reaching an all-time record for the company.

That strength was especially apparent in Dell's large enterprise as well as SMB business, both of which saw double-digit revenue growth, and in its channel business which grew substantially over last year.

Dell for its fourth quarter of fiscal year 2011, which ended January 28, reported revenue of $15.7 billion, up 5 percent over the $14.9 billion it reported for the fourth quarter of 2010. The company also reported income of $1.0 billion, or 53 cents per share, up 87 percent over the $544 million, or 28 cents per share, it reported last year.

For all of fiscal year 2011, Dell reported revenue of $61.5 billion, up 16 percent over the $52.9 billion it reported for 2010. The company also reported 2011 profits of $3.1 million, or $1.59 per share, up 51 percent over the $2.1 billion, or $1.05 per share, it reported last year.

Brian Gladden said the strong fourth quarter and full year 2011 results indicate better things to come from Dell. "We're confident in the sustainability of these results," Gladden said.

About 50 percent of Dell's total business came from the U.S. However, total Americas revenue grew only 3 percent, compared to 21 percent for the "BRIC" countries of Brazil, Russia, India, and China.

Indirect sales channels sales grew substantially faster than Dell's revenue as a whole. About 25 percent of Dell's total worldwide commercial revenue during the fourth quarter came via indirect sales channels, a Dell spokesperson told CRN. That revenue was up 21 percent compared to the fourth quarter of last year. However, the spokesperson declined to give actual revenue numbers for its channel sales.

Compared to the fourth quarter of 2010, total server and networking revenue for fourth quarter of 2011 was up 16 percent compared to unit growth of 6 percent, implying that average selling price rose during the year. Revenue for rack servers and blade servers both grew 26 percent during the fourth quarter.

On the storage side, Dell's results showed the company was sliding further from its dependence on its long-term EMC relationship. Total storage revenue fell 4 percent in the fourth quarter over last year, and rose a mere 5 percent for the entire year. However, Dell's EqualLogic storage revenue was up 49 percent in the fourth quarter, and up 62 percent for the entire year.

"Clearly our storage business has changed from being a storage reseller to a storage developer," Gladden said.

Steve Schuckenbrok, president of Dell Services, said that Dell's planned acquisition of storage vendor Compellent, which is expected to close soon, will have a big impact on Dell's storage business in terms of not only the additional revenue but in how Dell approaches the services side of storage.

Next: Looking Forward To Tablets, Consolidated Stacks, And A Great 2012

Schuckenbrok cited Compellent's Copilot service program which includes such services as proactive capacity management and load management as examples of the kind of services Dell plans to leverage throughout its storage business over time.

For the fourth quarter, Dell also reported software and peripherals revenue growth of 7 percent, commercial client revenue growth of 10 percent, mobility revenue growth of 4 percent, and desktop revenue growth of 4 percent. Mobile PC unit sales rose 4 percent, and desktop PC sales grew 3 percent, during the year.

Dell's fourth quarter large enterprise business revenue was $4.7 billion while its SMB revenue hit $3.7 billion. Both figures were up 12 percent compared to last year. Consumer revenue was $3.3 billion, which Dell said fell 8 percent year-over-year due to last year's strong Windows 7 launch.

Michael Dell, chairman and CEO of the company which bears his name, said that Dell will enter the 10-inch tablet PC business using both the Android Honeycomb and the Microsoft Windows operating systems.

"We think both will be reasonable platforms for us to enter this space," Dell said, in response to an analyst's question.

However, Dell declined to comment on HP's webOS operating system on which that company's upcoming TouchPad tablet PC is based, or on the recent moves by Nokia to move away from its own mobile device operating system and towards adopting Windows.

Customers really prefer Honeycomb or Android, Dell said. "We don't see any viable alternatives," he said.

Dell also responded to analyst questions about his company's moves to build a consolidated hardware stack to compete with the likes of Cisco's UCS (Unified Computing System) by noting that such stacks are still only a small portion of the total market.

"I think we've been pretty clear that open wins," Dell said.

While Dell remains open in terms of its hardware offerings, it is offering storage, server, and network stacks as a bundle for those customers who prefer them, Dell said.

"At Dell, you can get it integrated, and you can continue to get your choice at every layer," he said.

Looking forward, Dell the company expects total revenue for fiscal year 2012 to grow between 5 percent and 9 percent driven by solid enterprise solution and services growth. The company also said it expects non-GAAP operating income to rise by 6 percent to 12 percent for the year thanks to its revenue strength, a strong commercial business, and a flexible supply chain.