Dell Results Weak: Another Reason For Michael Dell To Leave

The market did not like Dell’s earnings and sold the shares down 3% after hours to $11.70. The performance give the Dell board of directors yet another reason to fire CEO Michael Dell. The earnings come in addition to an accounting scandal, a bribery charge involving Intel (NASDAQ: INTC), and charges that the company knowingly sold millions of flawed PCs

Dell’s EPS for its last quarter were below expectations. Analysts expect Dell to report earnings of 30 cents a share on revenue of $15.2 billion,according to a consensus survey by FactSet Research. Dell reported net income EPS of 28 cents compared to  24 cents in the same period a year ago.  Dell’s second quarter revenue was $15.53 billion compared to $12.76  billion in the second quarter 2009.

According to the company, Dell believes the corporate client refresh is well underway and that demand will continue through the next several quarters. For the third quarter, the company expects seasonal improvements from federal government sales and commercial businesses, resulting in a pick-up in the low single digits. Dell reiterated its outlook provided in June, anticipating revenue growth for the year from 14 to 19 percent and non-GAAP operating income growth between 18 to 23 percent.

Dell broke out unit performance as follows:

— Large Enterprise revenue was $4.5 billion, up 38 percent, with revenues for servers, services and mobility all improving by more than 50 percent. Operating income for the quarter was $288 million, a 68-percent improvement.

— Public revenue was $4.6 billion, an increase of 21 percent. Operating income for the quarter was $369 million, a 4-percent decline. Revenue from services, which includes Perot Systems, again more than doubled in the quarter from a year ago. Server and networking revenue increased by 12 percent. Sales to healthcare customers were strong while state and local government revenue was relatively flat.
— Small and Medium Business revenue was $3.5 billion, up 25 percent. Operating income was $323 million, a 32-percent increase. Revenue for SMB server and networking increased 28 percent; for storage, increased 22 percent; for desktop PCs, increased 29 percent, and for mobility, increased 32 percent.
— Consumer revenue was flat at $2.9 billion. Operating income was a $21 million loss. The company remains confident that initiatives underway will improve operating margins for the segment.
— Asia-Pacific and Japan revenue grew 38 percent and the Americas and EMEA were up 17 and 24 percent, respectively. Revenue in the quarter from outside the U.S. was 47 percent of the company’s total.

Dell continues to fall behind Hewlett-Packard (NYSE: HPQ) in PC sales and faces increased competition from China-based PC firms Acer and Lenovo

Douglas A. McIntyre