Dell Announces First Quarter Results, Shows Big Losses, Bright Spots, and a Transitional Posture

By Steve Anderson May 30, 2012

Dell announced its first quarter earnings results for the first quarter of fiscal year 2013 today, with some positive findings coming out, intermingled with some deeply troubling facets. Dell's transitional moves, as it sets out to become more than just a consumer electronics company and gain ground in the enterprise services and solutions market, are underscored in these results as well.

The centerpiece of the results was the announcement that Dell's overall revenue for the first quarter was a substantial $14.4 billion, with earnings of $.36 per share. While that number was a four percent decline from the previous year, it also perfectly illustrates Dell's move to become just as much an enterprise provider as a consumer provider, a move better illustrated by looking at the details of the report.

For instance, Dell Enterprise Solutions and Services saw a two percent jump in revenue to $4.5 billion, and was directly responsible for fully half of Dell's gross margin overall. Dell Services' revenue, meanwhile, saw an even better increase, up four percent, to bring in $2.1 billion for the company. Dell's storage services spiked 24 percent to bring in $423 million, and server and networking revenue saw two percent growth. Further gains came from Small and Medium Business, which saw a four percent boost to reach $3.5 billion.

Yet even amid the gains, there were losses in several sectors, showing Dell's moves to gain ground in newer sectors of the market. Large Enterprise revenue slipped three percent to $4.4 billion, and Public revenue saw a likewise four percent slip to $3.5 billion. Consumer revenue, meanwhile, slipped 12 percent to $3 billion for the quarter. Dell's overall sales performance was disappointing even to Dell itself, whose Chief Financial Officer Brian Gladden referred to sales efforts as "not up to our expectations", and missed Wall Street estimates by a substantial margin, sending shares down over 12 percent in the after-hours trading markets.

Dell expects the second quarter to look about normal in the historical sense, and looks to improve on the first quarter by a range of around two to four percent overall.

Basically, Dell is trying to augment its consumer offerings—which slipped considerably in the first quarter—with more enterprise-related offerings, which now make up about half of Dell's gross margin. While the economic environment itself has been nothing short of catastrophic for the last few years now, Dell's expansion to provide more for businesses has clearly given it some edge in the market.

It's a nearly universal imperative for businesses to go after as many potential revenue streams as they can reasonably handle, and in Dell's case, opening up its slate of offerings to give just as much to businesses as they formerly had to consumers is a very smart idea indeed. The earnings results show very clearly the value that enterprise sales can provide, and hopefully Dell will be able to continue on the path that they've already laid out and capitalize on growth in the enterprise sector.

Edited by Juliana Kenny

Contributing TechZone360 Writer

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