Channel and Overseas Sales Sparked Dell's First Quarter

One year after it began reorganization with the return of Michael Dell as head of his namesake company, Dell is reaping a big payoff as it expands into the channel and catches the wave of growth in emerging markets. The company now has 3,500 global partners and resellers, thanks to a partner program it started last year.

One year after it began reorganization with the return of Michael Dell as head of his namesake company, Dell is reaping a big payoff as it expands into the channel and catches the wave of growth in emerging markets.

Dell, which once sold almost entirely in the U.S., now says half its revenues come from overseas markets. It now has 3,500 global partners and resellers, thanks to a partner program it started last year. It sells its PCs in more than 13,000 retail outlets. The company expanded its partner programs in Europe and Asia during the first quarter. One measure of the channel's growing importance to the company is that Dell has also started hosting advisory meetings with channel partners to better hone its sales and marketing strategies. And Dell is also expected to host additional channel partner events in North American cities starting this month.

All of this activity yielded positive financial results for Dell last week when the company y announced earnings that exceeded Wall Street expectations. For its fiscal first quarter ending May 2, Dell earned $784 million, or 38 cents a share, up from $756 million or 34 cents a year ago. Revenue grew 9 percent to $16.08 billion. Analysts surveyed by Thomson Financial were looking for 34 cents per share profit on sales of $15.7 billion.

Dell is benefiting from an improvement in operating expenses. It eliminated about 3,700 jobs in the past quarter, quite a bit more than the 2,200 jobs analysts expected. "With the exception of some areas where we were investing heavily in sales capacity, like sales reps in APJ (Asia-Pacific/Japan) and emerging markets in Europe, you saw headcount cuts across the board and up into the senior management of the company," retiring CFO Donald Carty said on an earnings call with analysts.

Carty added that U.S. companies are "holding back from spending" on desktop systems, but the company sees healthy growth in server and data-storage equipment sales.

Carty also noted that Dell's strongest showing was overseas. Worldwide consumer product revenue growth was 47 percent, and unit growth was 20 percent. In particular, the high-growth BRIC (Brazil, Russia, India, China) nations were up 73 percent in revenue and 58 percent in unit volume. Revenue in India grew 52 percent year over year and China was up 30 percent. BRIC now accounts for 9 percent of Dell's total revenue.

Mobility products are the chief driver, with revenue growing 22 percent year over year. Storage was up 15 percent, thanks in part to Dell's acquisition of EqualLogic. Services revenue rose 13 percent and software and peripherals increased 17 percent. On the down side, server revenues rose only 4 percent over the same quarter last year, although unit shipments were up 21 percent, and desktop PC sales dropped 5 percent.

Carty, the former CEO of American Airlines, plans to retire as Dell's CFO next month, but serve as director. He will be replaced by Brian Gladden, a 20-year General Electric veteran, on June 13. Michael Dell spoke only briefly, noting that this was the first time in three years that Dell had outpaced the rest of the hardware industry. "Over time, I'm confident our broad IT goals, which include growth initiatives, will drive cash, earnings and shareholder revenue," he said.

"I'm encouraged by the acceleration in our growth," he added. "We continue to fill out our portfolio of products and services and you will see much more from us over the rest of the year, as we continue to drive shareholder value by growing our business."

(The article was adapted from Internetnews.com and edited by Al Senia )

TAGS: services,earnings,Dell,channel,Storage



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