Dell Reports 4Q Results
March 2, 2007
Dell reported preliminary results for the fourth quarter of fiscal year 2007, with revenue of $14.4 billion, operating income of $801 million, and earnings per share of $0.30. Dell ended the quarter with $12.5 billion in cash and investments.
In the quarter, several items impacted operating income and earnings per share. First, the company will not be paying out the full amount of accrued employee bonuses due to its failure to achieve its operating targets for fiscal 2007. The reduction in the provision for employee bonuses positively impacted operating income and earnings per share by $184 million and $0.06, respectively. Second, costs associated with the ongoing investigations into certain accounting and financial reporting matters reduced operating income and earnings per share by $89 million and $0.03, respectively. And third, a one-time gain on the sale of real estate added $36 million pre-tax to financing and other income, or $0.01 per share.
“We are disappointed with the company’s results, but what matters is our future plan of action. We are systematically moving to increase efficiencies, improve execution and transform the company,” said Chairman and CEO Michael Dell. “Our business model will become more aligned with the needs of our customers, which will improve their experience and yield improved growth and profitability for the long-term.”
Transformation Under Way The company said it is moving quickly to strengthen its management team, unify business units, and eliminate redundancies, while redeploying resources to drive greater value for customers. The company also said it is moving to shorten product development cycles, make decisions closer to the customer, and develop new approaches to manufacturing and distribution to better reach and serve customers in fast-growing and emerging markets.
Examples of these changes include the globalization, under new leaders, of Dell’s services organization, global operations (manufacturing, supply chain and procurement) and its global consumer business, including product design and development.
“We won’t achieve our goals overnight, but we will achieve our goals,” added Mr. Dell. “We will be known again for strong operating and financial performance and a great experience for our customers. But it will take time to realize the future benefits of the improvements we are making today.”
Strong International Shipments and Growth in Enterprise and Services among Highlights In the fourth quarter, international unit shipments exceeded U.S. shipments for the first time in company history. This drove the mix of revenue from outside the U.S. to a record 46 percent of Dell’s revenues.
Dell’s server offerings, including the new 9G servers featuring Intel and AMD processors, contributed $1.5 billion in revenues on two percent unit growth over the prior fourth quarter. Revenue from storage products was strong globally at $ 0.6 billion. Revenue from mobility products declined two percent to $3.8 billion on a two percent increase in units. Desktop revenues of $4.6 billion declined year on year driven by an 18 percent decline in units. Enhanced services revenues of $1.5 billion benefited from the addition of the company’s new Platinum Plus offerings for enterprise customers and Dell on Call for consumers.
Dell launched Microsoft Vista for Consumers in the quarter, offering systems equipped with the new operating system designed to deliver a rich digital lifestyle experience, combined with secure operations and ease of use.
Customer Experience Investments Deliver Results The company’s focus on customer experience yielded positive results in fiscal year 2007. In the U.S., customer satisfaction with Dell technical support improved significantly. The company reduced call transfers, and improved “Resolve in One” first-contact resolution of customer issues. Later this year, Dell will offer online data-migration and backup capability preinstalled by Dell to further strengthen its service and support offerings.
