Dell Inc. (Nasdaq: DELL) is keeping more of every dollar it makes. The world’s No. 3 PC maker (behind Hewlett-Packard and Lenovo) earned $1.1 billion in the third quarter on revenue of $15.4 billion. During the third quarter of last year, Dell earned $1 billion on virtually the same revenue. Dell says that a focus on higher-margin businesses led to its 12% increase in operating income on flat revenue.
“We delivered strong third-quarter results, maintaining our focus on operating income and improving our mix of higher-value enterprise solutions,” said Brian Gladden, Dell’s chief financial officer. Enterprise solutions and services revenue grew 8% during the past year, reaching $4.7 billion for the third quarter. The company said server and networking revenue increased 13% during the past year, and revenue from Dell-branded storage products increased 23%.
Dell reported non-GAAP earnings of 54 cents per share, higher than Wall Street’s consensus forecast of 47 cents per share. But investors focused more on the company’s outlook for the future, selling Dell stock Wednesday after pushing it up more than 2% on Tuesday ahead of the earnings announcement. Dell said that for the full year, revenue growth will be on the low end of its forecast of 1% to 5%. The company cited economic uncertainty and the shortage of hard drives caused by the flooding in Thailand as reasons for the reduced forecast.
Dell said third-quarter sales to consumers declined 6% to $2.8 billion. Dell’s operating margin in this part of its business was just 2.7%. In comparison, the margins were 9.8% on sales to large enterprises, 10.4% on sales to small and medium companies, and 10.6% on sales to public sector customers.
“Our results this quarter and over the past year reflect a new Dell, one focused on providing our customers productivity-enhancing solutions either developed organically or acquired,” said Michael Dell, chairman and CEO. “We’re now investing in research and development activities at almost a billion-dollar annual run rate, and our earnings per share is up 86% over the last 12 months.”
