After disclosing strong first quarter 2011 earnings results, Dell Inc. (DELL) has come up with a promising fiscal year 2011 earnings guidance.
First Quarter Snapshot
Revenue for the quarter was $14.9 billion, up 21.0% from $12.3 billion a year ago and almost flat with $14.9 billion in the previous quarter. The company’s first quarter revenue growth was due to strength across all business segments.
Additionally, commercial customers increased the purchase of Dell’s open, capable and affordable enterprise solutions during the first quarter, contributing to the company’s revenue and shipment growth.
As per revenue segments, Large Enterprise posted revenues of $4.2 billion, an increase of 25.0% year over year, mainly due to a 61.0% increase in server revenue and a 44.0% increase in services revenue. Public Segment revenues for the quarter were $3.9 billion, up 22.0% from the year-ago quarter. Small and Medium Business revenues were $3.5 billion, up 19.0% from a year earlier. Consumer Business revenues grew 16.0% year over year to $3.2 billion, with shipments growing 20%.
In addition gross margin for the quarter was 16.9%, lower than 17.6% in the first quarter of 2010, while moving up from 16.6% in the previous quarter. Earnings per share during the quarter were 22 cents, up from 17 cents reported in the year-ago quarter and also up from 17 cents reported in the previous quarter.
Fiscal Year 2011 Guidance
As per the guidance recently published by Dell, the company now expects fiscal 2011 revenue to jump 14.0% to 19.0% from the previous year, backed by a robust growth in consumer and corporate spending.
The company expects an increase in the number of customers after a restricted PC purchase during the economic downturn. The outlook also takes into account the increase in technology spending by different corporate entities across the globe.
The computer maker also forecasts full-year operating income, excluding special items, to increase 18.0%−23.0% from the year earlier period.
Our Recommendation
Some of the positive factors for the company include new products, a stronger services business, opportunities in the Electronic Medical Record sector, its smart phone initiative and Gartner’s increased 2010 PC shipment and spending forecast. The acquisition of Perot Systems has also expanded the customer base and opened up cross-selling opportunities. Its relative weakness in emerging markets, the mobile/consumer segments’ mediocre performance and a high level of debt are concerns.
We are reiterating our Neutral rating on Dell.
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