Dell Sees Profits Jump, Revenues Slow as Company Transitions
Dell is a company in transition during a time of significant economic turmoil, and the results are showing in its financial numbers.
Dell executives on Aug. 16 announced a second-quarter profit jump of about 63 percent, to $890 million, up from $545 million during the same period in 2010. That profit growth came on revenues of $15.7 billion, which was only a 1 percent increase over the second quarter last year.
Dell CFO Brian Gladden said those numbers were the result of the company's efforts to aggressively grow its data center solutions and services portfolio that encompasses not only higher-end servers, but also storage, networking and services. This is happening as Dell looks to streamline lower-end businesses, such as PCs and consumer electronics, and reduce the amount of technology it sells from third-party partners, such as storage giant EMC.
Customers are having to adjust to the changes in Dell s portfolio, but even as they may be buying fewer items right now, what they are buying are higher-priced products. Those products are coming from a mixture of in-house development and outside acquisitions, such as Dell's most recent purchase of storage vendor Compellent Technologies earlier this year and the announcement in July of its intentions to buy networking company Force10 Networks.
Dell is making the moves to grow into more of a solutions-driven vendor that can compete against the likes of Hewlett-Packard, IBM and Cisco Systems and take advantage of the demand from enterprises for more converged infrastructure offerings.
The result of all this is higher operating expenses and lower than normal revenues in the short term, but it also will mean greater profits now and down the road for Dell, according to Gladden. That s a trade-off the company is willing to make, he said.
"We're committed to this long-term transformation," he said during a conference call with analysts and journalists. "We're going to continue to make these long-term investments."