Arik Hesseldahl

Recent Posts by Arik Hesseldahl

The Good News Is Dell’s Enterprise Business Is Growing. Then There’s the Bad News.

Shares of Dell fell by more than 2 percent after hours as the PC and enterprise tech company reported earnings and sales that fell slightly short of the consensus view of analysts.

It’s not that there wasn’t good news, it’s just that there wasn’t enough of it to outweigh the bad news. Dell, as you know, has been trying to reorient itself away from its core PC business and toward what CEO Michael Dell has described as an end-to-end enterprise IT hardware, software and services company. He’s talked about this strategy numerous times, including once in an interview with AllThingsD, as have several of the executives on his team, including Chief Commercial Officer Steve Felice, Steve Schuckenbrock of Services and Marius Haas and John Swainson, who run Dell’s Enterprise and Software units.

So the good news is that that strategy is at least starting to look like its working, by at least one key metric. See the screen grab from Dell’s slide presentation below:

As you can see, year-on-year sales in Dell’s servers and networking business are up 11 percent, which is good news. And service? Down only 1 percent, which in the current environment is almost as good as holding the line.

Also, Dell said that on a revenue basis, enterprise solutions and services are on their way to collectively reporting $20 billion in annual revenue, which would amount to about 35 percent of its total sales based on the forecast of Wall Street analysts. (The consensus number for Dell’s fiscal year 2013 is $57.4 billion.)

The problem? Well, you can see it in the same slide. Sales of mobile PCs are down 26 percent. And PCs, both mobile and desktop, at $6.6 billion still account for slightly less than half of overall sales. When that much of the business is down, it’s kind of hard to meet expectations. Or as Brian Marshall, an analyst with ISI, put it in a note to clients just issued: “Changing the composition on $55-60 billion of annual revenue at Dell is a non-trivial task requiring many years — not quarters — to be realized.”

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