Hard drive supply issues weigh on Dell’s Q4 earnings

Dell’s fourth-quarter earnings were weighed down by weak client laptop sales and by pricing and provide problems caused by the floods in Thailand, Dell said on Tuesday.

For the quarter ended Feb. 3, Dell reported a web profit before one-time charges of US$913 million, down ten % from identical quarter last year. Earnings per share were $0.51, compared to the consensus estimate of $0.52, in step with analysts polled by Thomson Reuters.

Dell was challenged by pricing and provide problems associated with exhausting drives, particularly in its client laptop business, said Brian Gladden, chief monetary officer at Dell, on a decision to debate the earnings with media. Dell received the provides it required however costs went up considerably throughout the quarter.

The costs of alternative parts like memory and LCDs were favorable and helped offset a number of the impact, Gladden said. however the corporate had problem securing enough high-capacity drives for its additional profitable, higher-end merchandise.

“The disruption in provide can continue into the third quarter,” Gladden said.

Gladden provided the instance of the high-end XPS laptops, that are exhausting to sell with exhausting drives of solely 320GB. Overall, Dell absorbed roughly $150 million in prices associated with exhausting drive pricing problems, Gladden said.

“That played out across the portfolio,” he said.

Dell’s revenue for the quarter was $16 billion, growing by simply two % year over year. Analysts had expected revenue of $15.9 billion. together with one-time charges, web income was $764 million, an eighteen % drop compared to last year, and earnings per share were $0.43.

Revenue for the buyer section was $3.2 billion, down two %, Dell said. There was weak demand for client merchandise within the U.S., however revenue from alternative countries combined grew by ten %, Dell said.

Dell has been attempting to scale back its dependence on client PCs, where profit margins are lower, and expand in its higher-margin enterprise business.

Consumer merchandise accounted for concerning twenty % of Dell’s revenue within the fourth quarter, down from twenty one % a year earlier. Enterprise revenue was thirty %, identical compared to last year.

Dell can still focus heavily on its enterprise business within the year ahead, Gladden said. It poured billions into analysis and development for server and information center merchandise last year and can still do therefore in fiscal 2013, he said.

Dell invested $2.6 billion in enterprise-related acquisitions in fiscal 2012, the business year that simply ended for Dell. They included networking company Force ten Networks, storage company Compellent and security company SecureWorks.

The company’s enterprise business may receive a lift with the launch of the PowerEdge 12G line of servers within the current calendar quarter, said CEO Michael Dell. The servers can have Intel’s upcoming Xeon E5 processors, based mostly on the new Romley platform, a long-awaited update to Intel’s 5600 series processors announced in March 2010. Dell is hosting an incident in San Francisco Feb. twenty seven to announce new servers and alternative enterprise merchandise.

The servers can offer I/O enhancements through technologies like solid-state drives and 10-gigabit Ethernet, that may facilitate deploy virtualized machines faster. Dell is simplifying systems management within the servers and additionally integrating technologies from recent acquisitions like Force ten.

“We’re changing the complete sale from being a private product to effectively selling the complete information center,” Michael Dell said.

The company sees plenty of chance in software used to create cloud infrastructure and virtualize information centers, he said. the corporate earlier this month said it absolutely was forming a Software cluster, which is able to take charge of enterprise software offered in end-to-end merchandise. the corporate employed former CA CEO John Swainson to run the cluster.

For the primary fiscal quarter of 2013, Dell said it expects revenue to say no concerning seven % sequentially.