Dell's First Quarter a Bump in Company's Transformation
Dell’s revenues fell 4 percent and its profits 33 percent as the
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company continues to move away from its PC and server roots to become an enterprise solutions provider.
Dell’s well-publicized transformation hp pavilion dv2700tw dvd drive
from PC maker to enterprise solutions and services vendor is well on its way, but it won’t happen without some challenges.
That was on display May 22,hp pavilion dv6000 dvd drive
when Dell executives announced that in the first three months of the
year, the company saw revenue drop 4 percent from the same period in
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to $14.4 billion, and profits fall 33 percent, to $635 million.
The numbers were significantly short of hp pavilion dv6700 dvd drive
what Wall Street analyst had expected, and the company’s stock took a predictable beating. However, while admitting that thehp pavilion dv9000 dvd drive
first-quarter financial results were “mixed” and that Dell had some
areas to shore up, Brian Gladden, Dell’s senior vice president and CFO,
said the world’s third-largest PC makerhp pavilion dv9700 dvd drive
remained committed to its strategy, warning reporters and analysts on a
conference call that results of the transformation would “not be ibm lenovo thinkpad t400 dvd drive
“This is a long-term strategy and will take timeibm lenovo thinkpad t410 dvd drive
,” Gladden said, adding later that “we’re trying to move as quickly as possible in this transformation.”
The company’s enterprise efforts alsoibm lenovo thinkpad t410s dvd drive
had some mixed results. Dell’s Enterprise Solutions and Services Group
saw revenues rise 2 percent over the same period last year, to $4.5
billion. The group now comprises 31 percent of Dell’s revenues and half
of its gross margin. In addition, revenuesibm lenovo thinkpad x201s dvd drive
for Dell-owned storage IP were up 24 percent,ibm lenovo thinkpad x200 dvd drive
although—thanks in part to some leftover EMC-related sales—total storage revenue fell 8 percent.
In addition, Gladden noted that Dell ibm lenovo thinkpad x201 dvd drive
announced five new acquisitions related to its transformation strategy during the quarter.
However, large enterprise revenue fell ibm thinkpad r61i dvd drive
percent year-to-year, and Dell executives talked about some delays
they’re seeing in enterprise IT spending. Federal spending looks
promising, they said, but other public spending is slowing.
In a May 22 research note, Krista Macomber,lenovo g550 dvd drive
an analyst with Technology Business Research (TBR), said that despite the numbers, Dell’s transformation is still on track.
“The enterprise revenue decline is not yet alenovo g555 dvd drive
significant threat to Dell’s strategic direction,” Macomber wrote.
“Considering Dell’s expansive existing install base and go-to-market
know-how within the midmarket, Dell’s midmarket customers are adopting
its solutions and services ahead of enterprise sector customers.
Adoption trends are evidenced by Dell’s reported SMB [small and midsize
business] revenue growth of 4% year-to-year in 1Q12, with solutions and
serviceslenovo g560 dvd drive
revenue increasing 17% over the same time frame.”
Dell also expects an enterprise boost from the release during the
quarter of its 12th-generation PowerEdge servers, a portfolio that
Chairman and CEO Michael Dell called “incredibly strong. “ He said he
expects that the new servers will quickly become more than 25 percent of
Dell’s server mix.
Gladden and Steve Felice, president and chief commercial officer for
Dell, said there were some hurdles the company needs to overcome. They
said that the company’s sales strategy was not where it needed to be,
and noted the highly competitive enterprise environment, which includes
such tech giants as IBM and Hewlett-Packard. Felice said the company
will revamp some of its sales efforts, including pushing more integrated
solutions rather than single-product sales.
That move makes sense, according to TBR’s Macomber.
“Dell will focus on simplifying its product bundling and more
effectively capitalizing on core product lines and acquired IP alike,”
she wrote. “Competition from rivals such as HP and IBM will remain
strong, but adapting to longer and more complex sales cycles with
enterprise customers and focusing on selling integrated solutions rather
than singular pieces of the infrastructure will help Dell to win more
deals and increase its market share.”
Dell also was hurt by a 10 percent drop in notebook revenues—including a
15 percent decline in consumer notebooks—which executives attributed to
the competitive environment and consumer migration away from PCs and
toward mobile devices like smartphones and tablets. They also noted that
Dell is moving toward more of a mix of higher value systems, relying
less on the low-cost PCs that some consumers are trending toward.
During a question-and-answer period during the conference call, some
analysts speculated that consumers also may be putting off buying new
systems until later this year, when Microsoft launches its
next-generation Windows 8 operating system. Along with improved PC
sales, Dell also could see a boost from new tablets it plans to release
in conjunction with the Windows 8 launch.