This summary is based on the third quarter fiscal 2007 earnings call conducted by Dell Inc. (DELL) on November 29, 2007.
Management:
Chairman of the Board, Chief Executive Officer: Michael S. Dell
Senior Vice President, Chief Information Officer, President, Global Services: Stephen F. Schuckenbrock
Vice President of Investor Relations: Lynn A. Tyson
Vice Chairman of the Board, Chief Financial Officer: Donald J. Carty
Key Investors Issues
- EPS were 34 cents a share compared to 27 cents a share last year.
- Earnings rose to $766 million compared to$601 million the same period a year ago.
- Revenue grew 9% to $15.64 billion.
Third Quarter Highlights
The company generated $15.6 billion in revenue, a 9% increase year over year, and that revenue growth was driven by a 9% increase in units.
Operating income was up 13%, contributing to a 26% increase in EPS and the company generated $1 billion in cash from operations, which drove cash and investment balance up to $14.6 billion.
Operating profit benefited from strength in mobility, solid demand in enterprise products and a continued favorable component-cost environment.
These benefits were largely offset by costs the company is incurring as it restructures to improve productivity and execution, reduce headcount where appropriate, and invest in infrastructure and key growth priorities. For example, the company incurred $50 million, or 2 cents per share, related to employee reductions and asset disposals. In addition, the company incurred $28 million, or 1 cent per share related to the Audit Committee investigation which was concluded and other related costs. Earnings for the quarter were positively impacted by an adjustment of $45 million, or 2 cents per share, to lower the company’s effective tax rate for the year primarily because of a larger-than-expected mix of profits from outside the U.S.
Revenue for the Americas Business, which includes corporate and public customers in the U.S., as well as Americas International, was up 7%.
- The company maintained its No. 1 position in the U.S. commercial segment, with 34% of all units shipped.
- Americas International, which includes Latin America and Canada, had revenue growth of 19% year-over-year with 45% growth in Brazil.
In Asia-Pacific and Japan, where the company is actively expanding its presence, revenue grew by 18% on a 20% increase in units.
- Highlights in the region include India and China where revenue grew 47% and 22%, respectively.
- Revenue increased 14% and shipments were up 13% in Europe, Middle East and Africa.
- Revenue for servers and storage in the region were up 15% and 13%, respectively.
Sales outside the United States were up 16% and represented 46% of the company’s overall revenue, reflecting continued strength in emerging countries.
- Globally, revenue from mobility products increased 19% on a 25% increase in units.
- Revenue from both servers and storage grew 8% and shipments of servers increased 7%.
- Enhanced services revenue grew 7% to $1.4 billion. Desktop PC revenue declined 1% as the industry continues to shift towards mobility.
- Software and peripherals revenue posted an increase of 11%.
While revenue for Dell’s U.S. Consumer business declined 6%, the business segment made strong progress against key initiatives, including new product design, channels, product personalization and mobility.
- Consumers will be able to buy Dell products in nearly 10,000 stores including Gome, China’s largest consumer electronics retailer, and Staples’ 1,400 stores across the U.S.
- Dell closed the acquisition of ZING Systems Inc., a consumer technology and services company focused on always-connected audio and entertainment devices.
China, Brazil and India registered strong unit growth of 26%, 30% and 42%, respectively.
Combined Brazil, Russia, India and China (BRIC) revenue growth was 32%. The company plans to continue its initiative of tailoring solutions to meet specific regional needs, enhancing partner relationships to provide customer choice and flexibility, and expansion into these and other emerging countries that represent 85% of the world’s population.
