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By JESSICA MINTZ , Associated Press
SEATTLE, Wash. – Computer maker Dell Inc. (NASDAQ: DELL) said Thursday its first-quarter net income rose 52 percent, helped by sales of computers to businesses and technology services to public-sector customers.
But Dell’s gross profit margin dropped from a year ago, and the company said certain PC components are likely to remain in short supply. Investors sent shares down in extended trading.
For the Feburary-through-April quarter, Dell’s net income rose to $441 million, or 22 cents per share, from $290 million, or 15 cents per share in the same period last year.
Excluding certain items, Dell said earnings totaled 30 cents per share, three cents more than Wall Street analysts were expecting, according to a Thomson Reuters survey.
Dell’s revenue rose 21 percent to $14.9 billion, more than the $14.3 billion analysts were expecting.
The majority of Dell’s business comes from selling computers and other hardware, software and technology services to companies and other large organizations.
Dell, along with much of the technology industry, fared poorly during the worst of the recession, when businesses stopped spending to upgrade their systems and consumers flocked to the least expensive, and least profitable, PCs.
Dell’s report Thursday echoed what its larger competitor, Hewlett-Packard Co., said Tuesday, and what industry research groups published in April: Corporations were replacing aging servers and other behind-the-scenes technology first, and were just beginning to buy new PCs for employees.
Dell said revenue from large business customers jumped 25 percent to $4.2 billion in the latest quarter. Revenue from small and medium businesses increased 19 percent to $3.5 billion.
Brian Gladden, Dell’s chief financial officer, said during a conference call that companies’ desire to upgrade employee computers to Microsoft Corp.’s latest operating system, Windows 7, will fuel sales of new Dell computers, since less than 5 percent of Dell’s customers have upgraded so far.
Dell’s public-sector business is also growing, helped by a $3.9 billion deal Dell made last year to buy Perot Systems, which provides technology services for hospitals, the U.S. military and other organizations.
Researchers from IDC and Gartner Inc. also saw consumers flocking to inexpensive laptops during the quarter, as well as desktops where the guts of the computer are stashed in the monitor. Dell said its consumer business grew 16 percent in the quarter to $3.2 billion.
Dell’s gross profit margin – the percentage of its revenue left after subtracting the cost of making its products – was 16.9 percent, down from 17.6 percent at the same time last year. In part, higher prices for components including memory and LCD screens were to blame, Gladden said. Dell’s consumer PC business and sales to customers in Asia, both of which are less profitable than Dell’s corporate business in the West, made up larger parts of the total business than they did a year ago. Also, while PC sales to corporations are good for Dell from a revenue perspective, those machines are less profitable than server computers.
Dell, which is based in Round Rock, Texas, didn’t give specific guidance for the current quarter. But the company did say it expects revenue to be up only slightly from the fiscal first quarter despite its rosy commentary about business spending on PCs. The company said businesses, especially those in Europe, don’t buy a lot of technology during the summer months, but Dell will get a boost from selling to educational institutions.
Dell is the world’s third-largest PC maker behind Hewlett-Packard Co. and Taiwan’s Acer Inc.
Its earnings report came out after Dell stock fell 66 cents, 4.4 percent, to close at $14.32. In extended trading the shares fell 56 cents, 3.9 percent, to $13.76.
