Dell revenue climbed sequentially to $12.9 billion for the
third quarter, but did not meet analysts' consensus predictions as shipments
stayed flat sequentially and down 5 percent from the same period a year ago,
the company reports Nov. 19.
Revenue climbed 1 percent sequentially and fell 15 percent from the same period
a year ago. Net income came in at $337 million compared with $727 million
during the same period a year ago.
But Dell reports that shipments to large enterprise and small and midsize business
customers rose sequentially in the third quarter. Dell's enterprise-systems
business server and storage revenue climbed 5 percent and showed particular
strength in year-over-year EqualLogic sales, the company says.
Dell's Large Enterprise revenue climbed 4 percent sequentially to $3.4 billion,
but fell 23 percent from the same period a year ago.
SMB revenue at $3 billion climbed by 5 percent sequentially but was down 19
percent year over year. Public revenue at $3.7 billion fell 3 percent
sequentially and 7 percent from the same period a year ago. Consumer revenue
sat at $2.8 billion, flat from the second quarter and down 10 percent from a
year ago.
"We are seeing improvement in overall underlying IT
demand that is continuing into the fourth quarter," says Chairman and CEO
Michael Dell in a statement. "The same is true with momentum in Dell's
business, specifically in our Large Enterprise and SMB segments. The launch of
Windows 7 is being very well received by SMBs and consumers, and we'll see the
benefits of that more fully in our fiscal Q4."
Looking ahead, Dell says it expects seasonal demand improvement in the consumer
business in the fourth quarter while it expects demand in its Public business
to be lower. Dell says it expects fourth-quarter revenue to improve over the
third quarter.
The results fell short of analysts estimates, based on better than expected PC
market demand. Analyst company Bernstein Research had raised its estimates on
Dell's revenues for third-quarter revenue to $13.4 billion from $13.2 billion
just before Dell released its results.
"Our higher revenue estimate is due to better-than-expected PC market
demand in calendar Q3 (1 percent year-over-year growth versus our expectation
of 5 percent year-over-year decline) and a weakening dollar," writes
senior analyst Toni Sacconaghi in a report previewing Dell's earnings.
Sacconaghi notes that in the third quarter, PC units grew by 18 percent quarter-over-quarter—the
largest second to third quarter
increase in at least 11 years.
"This was surprising since much of the strength appeared to have been
driven by consumers, and immediately preceded Windows 7's launch on Oct.
22," Sacconaghi says. "We believe that some of the seasonally high
growth may have been driven by continued aggressive pricing on older Vista
units and some modest build of Win 7 offerings, but note that Dell would likely
not have benefited materially from the latter, given its more limited retail
presence."
The Bernstein report says Dell is in a position to take advantage of an upturn
in PC market volumes that may be triggered by an economic recovery.
"Dell's business model is highly transactional, and our analysis indicates
that an improvement in demand (in part due to an expected corporate upgrade
cycle in 2010) could material boost both gross and operating margin," the
company concludes.
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