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Dell Hit by PC Slump

For many Americans, Dell is perhaps best known as a direct to consumer PC brand. Yet Dell’s business is no longer entirely dependent on consumer PCs, which is a good thing for Dell as a company. Dell reported second quarter fiscal 2012 earnings late Tuesday that showed a double-digit decline in consumer PC sales. For […]

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Sean Michael Kerner

Aug 22, 2012

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For many Americans, Dell is perhaps best known as a direct to consumer PC brand. Yet Dell’s business is no longer entirely dependent on consumer PCs, which is a good thing for Dell as a company.

Dell reported second quarter fiscal 2012 earnings late Tuesday that showed a double-digit decline in consumer PC sales. For the quarter, Dell reported revenue of $14.5 billion, which is an 8 percent year-over-year decline. Net Income was reported at $732 million for a yearly decline of 18 percent, while Earnings per Share (EPS) came in at $0.42 for a 13 percent decline.

Dell’s future outlook is also looking a bit bleak. For the third quarter Dell is forecasting revenue guidance to be down 2 percent to 5 percent sequentially.

“We expect continued solid growth in Enterprise Solutions, Services and Software, combined with what we think is a realistic view of a challenging end user computing environment in the second half,” Dell CTO Brian Gladden said during the company’s earnings call.

Leading the downward charge at Dell is the consumer business, which has become increasingly challenging. Dell’s overall consumer business was down by 22 percent, coming in at $2.6 billion. Notebook revenues were hit particularly hard with a 26 percent decline.

Gladden noted that Dell is moving to try and improve its consumer performance with a refreshed Latitude and XPS system lineup of products that are thinner and more powerful.

“We”re positioned to be a leader in addressing the emerging corporate BYOD trend with our current XPS 13, 14 and 15 notebooks and our upcoming tablets and converged devices,” Gladden said. “In addition, you’ll see new Windows 8 Ultrabooks, all-in-one tablets and converged devices in the fourth quarter and headed into next year.”

Enterprise Growth

While Dell’s consumer business is not going in the right direction, its Enterprise business unit is enjoying better fortunes. Dell’s Enterprise Solutions and Services business reported $4.9 billion in revenue, up by 6 percent, with 14 percent growth in the server and networking business. Gladden noted that the Enterprise Solutions and Services business is now over a third of Dell’s total revenue.

“The Enterprise demand, obviously in the second quarter, was solid,” Dell CEO Michael Dell said during the earnings call. “We think the 12th generation PowerEdge refresh continues to be strong and we’re well positioned there.” Dell’s 12th generation PowerEdge servers were announced earlier this year as part of the Intel Xeon E5 release.

“Increasingly, we’re changing the sale to be a complete data center sale,” Dell added. “We think the addition of Windows Server 2012 is going to be an additional catalyst in the second half of the year and are feeling good about our portfolio there.”

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals Follow him on Twitter @TechJournalist.