Dell Beats Expectations on Storage, Services Strength

With enterprise buying coming back and particular strength in EqualLogic and its new services arm, the company handily beats expectations.

For the first time in quite some time, Dell reported quarterly figures that beat expectations -- and it was due to increased enterprise buying more than consumer and small-business spending, which had been the company's best business throughout much of the 2009 downturn.

For its first fiscal quarter ended April 30, Dell (NASDAQ: DELL) reported revenue of $14.9 billion and non-GAAP income of $584 million, or earnings per share of $0.30. GAAP net income was $441 million, or $0.22 per share. That represents a 21 percent year-over-year improvement in revenue and a 52 percent improvement in GAAP income. A consensus survey of Wall Street analysts by FactSet Research expected earnings of $0.26 per share on revenue of $14.3 billion.

Dell CFO Brian Gladden attributed the performance to a better economy that's sparking IT buyers to begin spending again in several key areas. He also credited internal changes at the company, something he and CEO Michael Dell have worked on for more than a year.

"This quarter was highlighted by good execution in an improving economic environment," Gladden said in a statement. "We feel good about the growth across our commercial business as it approaches nearly $50 billion in revenues. We will continue to make investments in our enterprise solutions throughout the year."

Enterprise business was the leader of all Dell businesses, up 25 percent, thanks to a 61 percent increase in server revenue and a 44 percent increase in services revenue. Government spending rose 22 percent year over year, with revenue from services more than doubling. The Small and Medium Business (SMB) segment rose 19 percent and consumer revenue rose 16 percent thanks to a 20 percent increase in unit shipments.

The two strongest specific markets were EqualLogic storage products, up 75 percent year-over-year, and services, thanks to the Perot Systems consulting business, which Dell acquired last year, and which rose 53 percent compared with the previous year. Sales in the BRIC (Brazil, Russia, India and China) countries continued to grow with a 60 percent year-over-year increase.

The company's internal austerity program continued to reduce expenses, with non-GAAP operating expenses down from 13.1 percent of revenue last year to 12 percent this year. The company reported $238 million in cash flow and spent $200 million in stock buyback.

Dell will hold a conference call with analysts on Thursday afternoon to discuss the results of the earnings.

Andy Patrizio is a senior editor at, the news service of, the network for technology professionals.

Tags: earnings, Dell, Servers & Services, EqualLogic, Storage

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