Dell looks to business as consumers and government sales fall
Dell (DELL) on Tuesday announced fourth-quarter sales of $16 billion, up 2 percent over the year-ago period and topping Wall Street forecasts. But earnings of $764 million were down 18 percent from the previous year and missed analyst expectations by 8 cents a share.
The technology company's fiscal-year 2012 revenue of $62.1 billion was nearly flat, growing only 1 percent year-over-year. Net income rose by a third, which the company said validated its strategy of focusing more on enterprise software and services.
One key factor weighing on Dell's growth is weak demand for its products from consumers and government agencies. Consumer revenue at the company was down 2 percent for the quarter, largely due to falling sales in the U.S. (Revenue from other countries grew by 10 percent.) Operating income was 1.2 percent of revenue, a 43 percent drop from the previous year.
Public-sector sales saw a 1 percent decrease because of continued weakness in the U.S. and the EU. Governments are still smarting from major financial institution bailouts, pressure to reduce spending, and even "austerity" measures in a number of countries in Europe. And consumer spending hasn't bounced back to pre-recession levels.
By contrast, another key market segment for Dell, corporations, have generally seen better financial results. The company hopes that focusing on selling more high-end servers and services will help it change its mix of business and power growth. Revenue Dell gets from large enterprises was $4.9 billion for the quarter, a 5 percent year-over-year increase.
A question hovering over Dell is whether customer spending can be expected to grow. Market research firm Gartner lowered its global IT spending forecast to growth of 3.7 percent year-over-year, down from its previous prediction of 4.6 percent. Still, Gartner thinks that enterprise hardware spending could increase by 5.1 percent and software by 6.4 percent. That suggests Dell will push even harder on software and services sales to help make up for the slack demand in other parts of its business.