Dell profits more than double on company upgrades

Dell has reported a 144% rise in third quarter net income to $822m (£511m), thanks to falling costs and a post-recession wave of IT upgrades.

Revenues in the three months to September rose 19% from a year ago, driven by corporate orders.

In contrast, the computer manufacturer reported only a 4% rise in takings from consumer clients, as household spending on laptops and PCs remained weak.

The US firm also said profit margins widened on a drop in component prices.
'Muted' consumer demand

"Dell is growing in the right areas, and I'm very excited about out momentum," said the company's founder, chairman and chief executive, Michael Dell, commenting on the company's third quarter results.

Regionally, revenue growth was strongest in the big emerging markets of Brazil, Russia, India and China, which together rose 30% on a year ago, led by India which was up 55%.

Dell said revenues had also been helped partly by its refusal to be drawn into price wars, claiming to have turned down some contracts that would have been insufficiently profitable.

Sales to public sector clients were buoyant - up 20% - despite a recent warning from peer Cisco that its sales to the US government sector would suffer because of fiscal cutbacks.

Dell said that it expected "to see continued strength from the ongoing client refresh among large corporate accounts and strong growth in enterprise products and services".

However, it thought that demand from consumer clients would remain "muted", and expected its full year profits to remain in the mid-range of its previously indicated 14%-19% growth forecast.
Fatter margins

The company's share price rose 4.8% on the results in trading after the official close of the New York markets, reversing much of a 6% drop in the share price following Cisco's warning last week.

While the strong revenue growth was actually slightly weaker than bullish market expectations, Dell also reported a surprisingly strong improvement in its operating profit margins.

The company attributed its stronger margins to lower component costs, as well as improvements in its supply chain.

Dell makes more than half of its revenues from the relatively low-margin PC sales business.

However, this area of business is expected to continue to do well as corporate clients upgrade their IT systems for Microsoft's newest operating system, Windows 7.

Source:
BBC
www.bbc.co.uk