Here's The Good News Buried In Dell's Awful Quarter

Business Insider

Dell's stock is crashing today thanks to the awful quarterly results the company reported yesterday after market close. It's down over 7%.

Dell revealed a lot of bad news, but amidst it, there are signs that Dell's turnaround into an enterprise company is starting to take hold.

The company missed analysts' expectations of $13.9 billion in revenues and $0.40 in earnings per share. The actual numbers: $13.7 billion in revenue and $0.39 in EPS.

Not a huge miss in absolute numbers, but the expectations were "very low-bar,"  Sterne Agee's Shaw Wu wrote in a research note issued today. Dell missed its own guidance for the quarter, too. It had promised $13.8 billion to $14.2 billion in revenues. Then it turned around and offered guidance for the next quarter lower than what Wall Street was looking for: $14 billion to $14.4 billion, versus consensus revenues of $14.5 billion.

A painful decline in the PC business accounts for much of Dell's problems.

"PC sales were down a steep 19%, including off 8% in desktops and a horrible 26% decline in laptops," UBS analysts wrote in a research note today. "Windows tablet success can’t come too soon."

Now for the good news: Dell's enterprise services revenue grew 3 percent, year over year, to $4.8 billion. A unit that sells server and networking equipment grew 11 percent.

"Although growth slowed, we think Dell’s enterprise business could be a sleeper," UBS's analysts wrote. "The company’s goal is to grow enterprise computing’s operating income contribution from about 45% today to 60% in F2016," adding that they are "optimistic" that Dell's turnaround could be strong by 2015.

Plus, Dell ended the quarter with $14.2 billion in cash and investments. It's using that money to buy its way deeper into the enterprise through acquisitions.

The company made another buy today, picking up 67-employee Gale Technologies for an undisclosed sum. The company makes a product called GaleForce that lets enterprise automatically move data between their own data centers and various clouds.



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