This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Dell Inc. (DELL) on February 28, 2008.
Management:
Chairman of the Board, Chief Executive Officer: Michael S. Dell
Vice Chairman of the Board, Chief Financial Officer: Donald J. Carty
Vice President of Investor Relations: Lynn A. Tyson
Key Investors Issues
- EPS were 31 cents a share compared to 32 cents a share last year.
- Profit was $679 million compared to $726 million a year ago.
- Revenue of $16 billion rose 10% from $14.5 billion a year ago.
Fourth Quarter Highlights
Revenue growth accelerated 10% year over year as the company generated $16 billion in revenue.
- Units were up 19% year-on-year and that was driven by rapid growth in emerging countries and in U.S. consumer business.
- Operating expenses are not yet where are needed to be but they came in at 13.9% of revenues.
- Operating income was $776 million, or 4.9%, which resulted in the earnings per share at 31 cents.
The company had $83 million in expense, or 4 cents a share that relates to the write-off of what is in-process research and development that result from the acquisition of EqualLogic and Everdream.
That is in-process research and development at the time of acquisition.
- The company had $54 million in expense, or 2 cents a share that relates to the realignment of business, including some severance costs and some facility closures.
- The company has $27 million in expense, or 1 cent a share that continue to be the result of the investigation that was conducted here at Dell as part of the SEC inquiry.
- The company has $11 million in amortization expense associated with the purchased intangible assets associated with the acquisitions.
- The company has a reduction in a litigation reserve related to copyright levees that amounted to $58 million or 3 cents a share, and a $44 million expense reduction, or 1 cent a share that relates to an annual true-up for the full year of stock award forfeiture credits related to FASB-123R on stock-based compensation expense. That arises largely as a consequence of people leaving the company and therefore forfeiting stock awards that had not fully vested.
The company had a $207 million reduction in the provision for employee bonuses or 7 cents a share that favorably impacted the fourth quarter of 2007.
The company had an $89 million expense or 3 cents a share in that quarter that again related to the investigation and it had a $36 million one-time gain on the sale of some real estate in financing and other income and that amounted to 1 cent a share.
The company continues to evolve foreign legal entity structure and that resulted in the movement of $5.3 billion to the U.S. where the funds can be used for general corporate purposes, including CapEx, acquisitions and importantly, share repurchase.
- Cash flow from operations was $1.2 billion and the company ended the quarter with $9.5 billion in cash and investments, and weighted average shares were 2.2 billion.
- Cash conversion cycle was negative 36 days and return on total capital was 34%.
- The company did spend $4 billion to repurchase $179 million shares of stock and that represented 8% of the outstanding stock at the time the quarter began. The company expects to spend at least an additional $1 billion.
Americas business grew revenue 7% year over year, driven by a 22% increase in Americas International.
- As the quarter progressed, the company did see more conservative spending in some of the global accounts and in particular in financial services.
- U.S. consumer revenue growth accelerated at 12%, driven by new products and expansion into the retail channel while posting a 2% operating loss in the quarter. The company gained over three points of share, the largest increase in three years.
- Growth and profitability are not minor for Dell. The company has definitive plans to increase profitability in consumer business, certainly up to competitive levels. That is going to largely be driven by changes to product design, manufacturing and delivery models, significant and targeted reductions in operating expenses, and an improved mix of product and services.
EMEA’s revenue was up 8% year-on-year, driven by mid-teens revenue growth in France and a 70% growth in Poland, and operating income was up sequentially year over year.
- In Asia-Pacific and Japan, revenue accelerated 28% year-on-year with a 41% increase in units.
- Operating income as a percent of revenue also increased, and India and China grew 57% and 32% respectively with all product categories performing at or above expectations.
In client focus on mobility continues to fuel improved growth as revenue increased 24% year-over-year, driven by a 37% increase in units, and desktop revenue was up 2% on 10% unit growth.
