Arik Hesseldahl

Recent Posts by Arik Hesseldahl

On Its Way to Going Private, Dell Beats Street’s Expectations

DellatCESIn what may — or may not — turn out to be its final earnings report as a publicly held company, computing giant Dell just reported profits that beat the expectations of analysts.

Dell reported earnings of 40 cents per share on sales of $14.3 billion, better than the consensus view of 39 cents a share on sales of $14.12 billion. Dell shares rose by 4 cents, or about 0.3 percent, to $13.85 after hours as the news crossed the wires.

Dell, you’ll remember, is still in the process of trying to transform itself from the PC-heavy company you remember from the funny TV ads into a more enterprise-focused company emphasizing servers, software and services. The main trouble Dell has had is that it hasn’t been able to make the enterprise-focused business grow fast enough — at least not yet — to offset the dwindling sales of the PC segment.

Since that hasn’t worked out so well yet, Dell has decided to pursue a leveraged buyout and go private. Expect a lot of questions from analysts about that, and precious few answers from Dell

I’ll have a little more in a few minutes after I’ve taken a closer look at the press release, but for now here it is:

ROUND ROCK, Texas–(BUSINESS WIRE)–
Dell announced fiscal 2013 fourth quarter and full-year results today, with revenue of $14.3 billion for the quarter and $56.9 billion for the year. Revenue from enterprise solutions and services grew 6 percent in the quarter to $5.2 billion and was $19.4 billion, or 34 percent of Dell revenue for the fiscal year, a 4 percent gain over fiscal year 2012.
“We continued to execute our long-term strategy in Q4, and realized a 6 percent increase in our enterprise solutions and services business,” said Brian Gladden, Dell CFO. “We also continued to generate strong cash flow from operations of $1.4 billion in the quarter. Our strong balance sheet and cash position enabled the company to invest almost $5 billion in new capabilities and intellectual property this fiscal year, including great assets like Quest, SonicWall, Wyse and AppAssure.”
Results
Revenue in the quarter was $14.3 billion, an 11 percent decrease from the previous year, and a 4 percent increase sequentially. Revenue for the 2013 fiscal year was $56.9 billion, an 8 percent decrease. Dell’s fiscal year 2012 had an extra week, which was incorporated into the company’s Q4 results.
GAAP operating income for the quarter was $698 million, or 4.9 percent of revenue. Non-GAAP operating income was $954 million, or 6.7 percent of revenue. Gross margins for the quarter benefitted by approximately $250 million, primarily resulting from vendor settlements. For the fiscal year, GAAP operating income was $3 billion and non-GAAP operating income was $4 billion.
GAAP earnings per share in the quarter was 30 cents, down 30 percent from the previous year; non-GAAP EPS was 40 cents, down 22 percent. For the fiscal year, GAAP EPS was $1.35, down 28 percent year over year and non-GAAP EPS was $1.72, down 19 percent.
Cash flow from operations in the quarter was $1.4 billion, and Dell ended Q4 with $15.3 billion in cash and investments. Full-year cash flow from operations was $3.3 billion.

dellq42013

Products and Solutions:
Dell server revenue increased 5 percent driven by strong growth in the company’s hyper-scale data center solutions business and migration to the company’s 12th-generation servers. The 12G-server line now represents almost 80 percent of Dell PowerEdge server revenue at average selling prices and margins that are a premium over previous-generation servers.
Dell networking continued to deliver strong growth, with a 42 percent revenue increase, including more than 100 percent growth in the company’s Force10 business.
Dell Quest software delivered revenue over the company’s stated target of $180-$200 million for the quarter. The company’s security software business also grew sequentially.
Dell desktop and mobility business revenue declined 20 percent and was up 3 percent sequentially.
Business Units and Regions:
Large Enterprise had revenue of $4.7 billion in the quarter, a 7 percent decrease. Operating income for the quarter was $393 million, a 16 percent decrease. Server and networking revenue increased 25 percent and ES&S business grew 10 percent. Revenue for the full year was $17.8 billion, down 5 percent from the previous year.
Public revenue was $3.5 billion, a 9 percent decrease. Operating income for the quarter was $236 million, a 25 percent decrease. Servers and networking revenue grew 11 percent. Revenue for the full year was $14.8 billion, down 8 percent from the previous year.
Small and Medium Business revenue was $3.4 billion, a 5 percent decrease. Operating income for the quarter was $385 million, a 4 percent decrease. SMB enterprise solutions and services sales increased 9 percent for the quarter, driven by servers and networking growth of 13 percent and services revenue growth of 17 percent. Revenue for the full year was $13.4 billion, down 1 percent from the previous year.
Consumer revenue was $2.8 billion, a 24 percent decline for the quarter. Operating income was $8 million, an 87 percent decrease. Revenue for the full year was $10.9 billion, down 20 percent from the previous year.
EMEA revenue decreased 14 percent in the quarter, Americas was down 10 percent, and Asia-Pacific and Japan declined 9 percent.
Company Outlook:
Given the company’s announcement Feb. 5 of a definitive merger agreement to take Dell private, the company is not providing an outlook for its fiscal 2014 or Q1.


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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik