Overall, Dell reported an 11% increase in quarterly revenue to $14.9 billion for the Q4FY10. Net income declined 5% YOY to $334 million. For FY 2010, Dell reported revenue of $52.9 billion which was down 13% when compared with FY 2009. However, Dell was able to beat market expectation.
From Business Unit perspective,
Large Enterprise and Public Sector experienced growth of 8% (to $4.3B) and 16% (to $3.8B) respectively (YOY) in revenues with operating income of $281M and $333M. Revenue in large enterprise segment and public sector segments was strengthened by favorable server market and, also partially by Perot System acquisition by Dell in Q4FY10.
In SMB, though revenues increased 10% YOY to $3.3B margin was low (op. inc. of $282M). Consumer revenues increased 11% YOY to $3.5B (29% year-over-year increase in shipments). In this segment operating income declined significantly from Q409 to $0M.
From a product segment perspective,
Desktop PC revenues declined 3% YOY to $3.4B on a 1% improvement in units. Mobility revenues increased 16% YOY to $4.7B on a 32% increase in unit. Server revenues grew 26% YOY to $1.8B with a 17% improvement in unit shipments. Storage business saw a revenue decline of 15% YOY to $599M. Services grew 5% YOY; however with Perot's business included, revenues were up 51% to $1.9B. Software and Peripherals revenue was flat YOY with revenues of $2.5B.
While demand is clearly returning to the market, competitive marketplace will be very exciting to watch for.
Server market seemed to be favorable for most of the hardware players. In most recent quarter (Q1FY10 ended on Jan 31, 2010), HP recorded high growth in server market (Industry Standard Servers up 27% and Blade up 24% YOY). IBM also posted a high growth (37% YOY) in its x86-based x-Series business in its Q4FY09 (ended Dec 31, 2010). Dell posted strong server revenue (up 47% YOY) in Large Enterprise segment.
Decline in PC (Desktop) revenue at Dell is in contrasts with some competitors (HP saw a 16% revenue increase) who are seeing much stronger desktop unit growth rates. Here we must notice the challenges posed by component pricing and Dell’s recent entry into retail market. Market is giving way to Mobility products. Dell is well positioned to benefit from expected PC refresh cycle.
Storage revenue from key players saw contraction with HP declining 3% and EMC declining 6.7% in their most recent quarter. Dell’s storage business declined 15% YOY but its EqualLogic revenue continued to grow at a healthy 44%. Dell's storage business did experience 18% QOQ growth as market demand returns.
Dell’s services revenue grew 51% (5% without Perot) YOY. HP’s services revenue was down (-1% YOY). While HP stated that its EDS integration goals are “ahead” of plan, these were not able to deliver growth for FYQ1. Acquisition of Perot System has given Dell opportunities to expand within existing customers and also reach new public, health care and large enterprise customers it has not sold to previously. Market will watch carefully how Dell leverages this acquisition to fuel growth.
Dell’s heavy reliance on PCs for revenue curbed its ability to maintain revenue growth during the recent PC market downturn and hurt its profitability during 4Q09. Dell has opportunity to leverage its Dell Services group to drive sales of hardware-software-services bundles to customers in its Large Enterprise, Public and, increasingly, SMB segments.
Geographically, Dell generates more than 50% revenue from Americas and addition of perot system will add to this concentration. Comparing this with HP and IBM who generate approx 44% and 42% respectively from Americas, Dell has potential to expand its market geographically. And it has been doing that successfully. Dell’s revenue from BRIC countries grew 72% YOY.
Friday, March 5, 2010
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