Dell Gains 9-Percent in Fiscal Third-Quarter EPS

PC maker Dell Inc. recently announced its third-quarter financial results, and posted a 9 percent increase in earnings per share, which rose to 37 cents, on revenue of $15.2 billion. The company explained that its earnings improved solidly due to a “disciplined cost management and an improved mix of products and services in a challenging demand environment”.

“Our business model adapts quickly to economic changes, even the kind of significant challenge we saw in the third quarter,” said Michael Dell, chairman and CEO. "We increased profitability with an improved mix of products and services – more than a third of our revenue and profit now comes from servers, storage, services and software and peripherals – and benefited from initiatives to improve our competiveness, including tight cost controls."

“During previous periods of economic challenge, Dell led in providing customers the technology they want and the value they need, and we’re doing it again. We're simplifying IT, reducing costs and maximizing productivity for customers.”

Dell also announced that it would continue to focus on five areas, including Notebooks, Enterprise, Global Consumer, Small and Medium Business and Emerging Countries.

The financial results the company posted showed its revenue down 3 percent, while unit-shipment went up 3 percent. Dell's operating income improved 22 percent to $1 billion, or 6.7 percent of revenue. The gross margin was of 18.8 percent, driven by “an improved mix of products and services, lower component costs, and continued progress on cost-reduction initiatives announced in April”. The operating expenses registered an 11 percent decline on a dollar basis compared to a year ago and were 12.1 percent of revenue. Compared to the second quarter, Dell ended Q3 with 2,200 fewer positions, down 9 percent from the previous year.

“The velocity of Dell’s business model typically gives us an early view to demand signals, ahead of competitors,” said Brian Gladden, Dell’s CFO. “This visibility gives us a strategic advantage to quickly adapt our cost structure and approach.”

As demand saw a constant decline through October, the company’s cash conversion cycle was affected, marking negative cash flow from operations of $86 million. The company expects more typical cash generation to resume as its growth also stabilizes. Dell's cash flow from operations was of $1.2 billion year to date and the company ended the quarter with $8.9 billion in cash and investments. $400 million were spent by Dell during the quarter to buy back 21 million shares.

Dell also posted 48 percent of the revenue as being registered from outside the U.S. The revenue for the BRIC countries of Brazil, Russia, India and China increased by 20 percent, while shipments went up 43 percent. This accounted for 9 percent of the company’s global revenue.

According to Dell, the global IT end-user demand will continue to be challenging. Even so, the company will still focus on improving competitiveness, lowering costs and improving its mix of products and services to optimize liquidity and profitability. Moreover, Dell said that it would continue to realign business so as to reduce headcount in certain areas and invest in infrastructure, growth opportunities and acquisitions.