Dell profit up 52 percent on improved corporate sales

Dell profit up 52 percent on improved corporate sales

The company's profit and revenue both were higher than analysts expected

Dell reported its first increase in quarterly profits for two years on Thursday, helped by an uptick in commercial spending and its ongoing efforts to reduce costs.

Net income for the three months ended April 30 was US$441 million, up 52 percent from the same quarter last year. Excluding one-time charges, Dell made $0.30 per share, ahead of the $0.27 forecast by financial analysts polled by Thomson Reuters.

Revenue was up 21 percent to $14.87 billion, ahead of the analyst estimate of $14.27 billion.

The results will come as a relief for Dell, which reported declining profits for the past seven quarters. The company is more dependent than its rivals on hardware sales to businesses, a sector of the economy that is recovering more slowly from the recession.

"We had a solid first quarter in an improving global environment. Demand has picked up, especially with commercial customers, who make up approximately 78 percent of our revenue," Chief Financial Officer Brian Gladden told reporters.

Still, Dell's shares were down 3 percent in after-hours trading, at $13.92. Investors were apparently concerned about a dip in profit margins that resulted partly from higher component prices.

"Components continue to be relatively tight, and memory has been a bit of a challenge," Gladden said.

Dell said it is optimistic that its commercial business will keep picking up throughout the year, helped by what it hopes will be a strong refresh cycle for PCs. But it also noted that sales to corporate customers usually slow a bit during the second quarter and the first half of the third.

Revenue from Dell's large enterprises business, which tends to generate higher profits, picked up 25 percent from a year earlier, to $4.2 billion. Sales to the public sector, mostly governments, also increased sharply, to $3.9 billion.

Sales of "mobility products" -- mostly laptops -- climbed 18 percent to $4.6 billion, while desktop sales were up a more modest 13 percent.

Sales of servers and networking equipment climbed 39 percent to $1.8 billion, and services revenue -- bolstered by Dell's acquisition of Perot Systems last year -- jumped 53 percent to $1.9 billion, Dell said. Sales of its EqualLogic gear jumped 75 percent, but storage overall was up just 4 percent.

Dell said business was particularly brisk in India, where sales increased 90 percent, and in Brazil, where they grew 81 percent. But Gladden said sales in those countries tend to produce lower margins.

HP also reported strong PC sales this week, and sales of its industry-standard servers were up 54 percent. That fuelled a 28 percent increase in HP's profits, to $2.2 billion.

HP is the number-one PC vendor worldwide, followed by Acer and then Dell, according to recent figures from IDC. In the U.S. Dell is number two.

Dell has been trying to diversify its business to sell a wider range of enterprise products. Last year it bought Perot Systems for $3.9 billion, and the company has said it will do more deals in the future.

"We'll continue to be acquisitive," CEO Michael Dell said on Thursday.

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