Revenue disappoints and outlook cut, but company remains bullish
Dell is remaining positive despite what it describes as ‘modest’ financial figures and global economic uncertainty that has forced the Round Rock, Texas-based firm to slash its revenue forecast for the rest of the year.
Profit for the second quarter shot up 63% from this time last year to $890m. However revenue climbed just 1% to $15.66bn. This fell short of the $15.75bn the Street had been expecting and shares in the company slipped around 8% after the news was announced.
Dell is also revising its sales outloook for the year, from 5-9% down to 1-5%. The company said this was because of, "strategic decisions to redirect resources from lower- to higher-value solutions and a more uncertain demand environment."
Speaking to CBR about the financial results, Stephen Murdoch, Dell’s senior exec in EMEA and vice president of Large Enterprise and Public Sector, said the figures were a results of the company’s shift to higher value parts of its midmarket business, such as servers and storage and services. The company has also exited from a reseller agreement with storage giant EMC, which has had an impact on revenue.
Dell Services revenue grew 6% to $2bn and its SecureWorks security services division added over 200 new customers during the quarter, the company said. Servers and networking revenue increased 9% year over year to just over $2bn. "The results show great proof points around the transformation of our business, despite the modest revenue growth" Murdoch told CBR.
Murdoch added that in the UK and across Europe demand for servers, storage and services was strong in both large businesses and public sector. Both were moving away from monolithic IT systems in favour of what Murdoch described as projects that are primarily focused on return on investment, which plays into Dell’s hands, he said.
Murdoch also confirmed that Dell would be sticking on its acquisition path. Oracle boss Larry Ellison recently suggested his firm would take a step back from its acquisition strategy due to a lack of value in the market at the moment. "We’re still pushing ahead with our plan to acquire six to eight companies per year," said Murdoch. "If we find the right asset at the right time and costs we’ll do it."