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Strength in Commercial Business, Led by Growth in Enterprise Technology, Drives Solid Dell Revenue Increase and Cash Flow in Fourth Quarter
- Revenue, product shipments and operating income up at doubledigit rates year over year
- Cash flow from operations totals $1.3 billion for the quarter, $3.9 billion for the year
- EPS 17 cents per share on a GAAP basis, 28 cents non-GAAP
Commercial customers attracted to Dell's powerful and practical technology, especially enterprise IT solutions, helped account for the company's solid fiscal fourthquarter revenue growth and strong cash flow from operations.
Fiscal-Year 2010 Fourth-Quarter Highlights
- Total revenue in the quarter ended Jan. 29 was $14.9 billion, an 11percent increase from a year ago and a 16percent sequential gain. Revenue improved in all of Dell's business segments as the company consolidated results from the former Perot Systems for the first time.
- Cash flow from operations was $1.3 billion for the quarter, $3.9 billion for the full fiscal year. Dell ended the quarter in which it completed the acquisition of Perot Systems with $11.8 billion in cash and investments.
- Product shipments increased 16 percent (11 percent sequentially), led by an 18percent rise in Dell's Small and Medium Business unit and a 29percent increase in Consumer. Notebook shipments were up 32 percent yearoveryear.
Please find the chart of the fourth quarter results FY 2010 enclosed.
- GAAP gross margin was 16.6 percent of revenue. Non-GAAP gross margin was 17.4 percent of revenue, pressured by seasonal strength in consumer demand, which has lower margins.
- GAAP operating expenses were 13.2 percent of revenue. Non-GAAP operating expenses were 12.1 percent of revenue, or $1.8 billion, compared with 12.8 percent a year ago, the result of continued sharp attention to cost structure and operational execution.
- GAAP operating income was $510 million, or 3.4 percent of revenue. Non-GAAP operating income increased 11 percent to $798 million, or 5.4 percent of revenue.
- Dell delivers comprehensive, easytoconfigure, endtoend solutions comprising stateoftheart servers, storage systems, networking products, software and management tools. Dell's approach is distinctly different from those of other companies, whose often proprietary, closed technology is more likely to benefit the supplier than the customer.
- Dell's open, capable and affordable enterprise solutions produced a 26percent increase in server revenue in the quarter. The company's easytodeploy and easytomanage EqualLogic storage solutions continue to be well received by customers, with revenue from that line up 44 percent. Overall storage revenue was down from a year ago, but up 18 percent sequentially, as the company emphasizes highervalue storage technology.
- Company revenue from services increased 51 percent, mostly because of new capabilities associated with the Q4 acquisition of Perot Systems. The expanded Dell Services is providing a streamlined range of practical solutions that enable customers to get more out of their IT investments. Dell services and solutions are tailored to make them relevant for businesses and organizations of all sizes.
- Total revenue from commercial customers grew 11 percent (13 percent sequentially) as all segments saw improving demand. Sales of enterprise systems were up 17 percent sequentially.
- Combined sales in rapidly growing economies were up strongly. In the BRIC countries (Brazil, Russia, India and China), revenue increased 72 percent-81 percent in China, led by SMB and Large Enterprise.
- Large Enterprise revenue was $4.2 billion, up 8 percent (23 percent sequentially). Operating income for the quarter was $281 million, an 8percent improvement. Operating income as a percent of revenue was up 1.6 points sequentially.
- Public revenue was $3.8 billion, an increase of 16 percent-3 percent without Perot Systems. Revenue from services more than doubled, reflecting the strong standing of solutions from the former Perot Systems with government and healthcare customers. Public operating income was $333 million, up 15 percent.
- Small and Medium Business revenue was $3.3 billion, up 10 percent, driven by stronger sales of mobile products and servers. Shipments rose 18 percent. Operating income was $282 million, 18 percent higher.
- Consumer revenue was $3.5 billion, an 11percent increase. Revenue for consumer mobility products was up 26 percent. Shipments increased 29 percent (23 percent sequentially). Operating income was $9 million. During the course of the year, Dell significantly expanded its consumer product portfolio and worldwide customer reach through retailers, contributing to FY10 product shipments that were 2 million units higher than in the previous year.
Michael Dell, chairman of the board and chief executive officer: "Our solutions portfolio is expanding rapidly, driven by our strong capabilities, ongoing innovation and smart acquisitions. We continue to listen to and engage closely with customers through millions of conversations and interactions each day, enabling Dell to provide more relevant, valueoriented solutions to help meet their unique needs."
Brian Gladden, chief financial officer: "We achieved solid revenue growth in every part of our business. Our commercial units are well poised for profitable growth as demand continues to return because we're meeting customer requirements for highervalue, highermargin servers, storage systems and services. For the full year, we generated $3.9 billion of cash flow from operations - more than twice the amount in the prior year."
- Dell saw demand in the important commercial business continuing to return during the fourth quarter and is cautiously optimistic that this trend will continue into fiscalyear 2011. The company is confident in its ability to deliver the right technology to commercial customers and believes its extensive and ongoing cost actions position it well for this environment of increased demand. Longer term, the company is confident it can generate growth in revenue, operatingincome margin and cash flow from operations.
Non-GAAP Financial Measures:
This press release includes information about non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share (collectively the "non-GAAP financial measures"), which are not measurements of financial performance prepared in accordance with U.S. generally accepted accounting principles. Dell has provided a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure under the heading "Reconciliation of Non-GAAP Financial Measures" and a detailed discussion of our reasons for including the non-GAAP financial measures and the limitations associated with those measures under the heading "Use of Non-GAAP Financial Measures." Dell encourages investors to review the reconciliation and the non-GAAP discussion in conjunction with our presentation of these non-GAAP financial measures.
Statements in this press release that relate to future results and events (including statements about our future financial and operating performance, anticipated component costs, and future customer demand) are forwardlooking statements based on Dell's current expectations. Actual results and events in future periods may differ materially from those expressed or implied by these forwardlooking statements because of a number of risks, uncertainties and other factors, including: weak global economic conditions and continuing instability in financial markets; Dell's ability to reestablish a cost advantage over its competitors; its ability to generate substantial non-U.S. net revenue; its ability to accurately predict product, customer and geographic sales mix and seasonal sales trends; information technology and manufacturing infrastructure failures and breaches in data security; its ability to effectively manage periodic product transitions; disruptions in component or product availability; its reliance on vendors for quality products and components, including reliance on several singlesource or limitedsource suppliers; its ability to access the capital markets; risks relating to its internal controls; potential unfavorable outcomes of tax matters and legal proceedings, including the continuing SEC investigation into certain accounting and financial reporting matters; its acquisition of other companies; its ability to properly manage the distribution of its products and services; the success of its costcutting measures; effective hedging of its exposure to fluctuations in foreign currency exchange rates and interest rates; counterparty default risks; obtaining licenses to intellectual property developed by others on commercially reasonable and competitive terms; its ability to attract, retain and motivate key personnel; loss of government contracts; expiration of tax holidays or favorable tax rate structures; changing environmental laws; and the effect of armed hostilities, terrorism, natural disasters and public health issues. For a discussion of those and other factors affecting its business and prospects, see Dell's periodic filings with the Securities and Exchange Commission. Dell assumes no obligation to update forwardlooking statements.
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