Dell Shares : Total Cost

Dell Seeing Demand Stabilization, Expects Slight Seq. Revenue Growth with Modest Margin Pressure in Q2

Robert L Williams — Mon, 13 Jul 2009 19:37:00 GMT

This afternoon after the close of the financial markets, we shared a press release announcing that year-over-year demand for our information-technology products appears to have stabilized, and that we expect to report a slight sequential revenue increase in our fiscal second-quarter 2010, which ends July 31. In the announcement, we also said that we anticipate a modest decline in Q2 gross margins, the result of higher component costs, a competitive pricing environment, and an unfavorable mix of product and business-segment demand. Also, we shared that over the longer horizon we are targeting 5-7 percent compounded annual sales growth, operating income at or above 7 percent of revenue, and cash flow from operations exceeding net income. It's important to point out that such results are dependent on broad global economic improvement accompanied by higher worldwide IT spending, including sustained double-digit growth rate in demand for computer systems. As always is the case with announcements like these, I highly encourage you to read the complete press release for additional details and disclosures.

This news was released prior to our analyst meeting, which will take place Tuesday, July 14^th here in Austin, TX and is available live via webcast on Dell.com/Investor. The analyst meeting is an opportunity for analysts, investors, and you to listen to Dell Leadership and review our strategy and financial overview, and ask questions directly to the executives which you can do via the web this year. At the analyst meeting, Dell executives will discuss the company's strategy and operating agenda along with a financial overview and update on its four customer segments.

As always, our IR team is here to answer your questions.

- Rob

CFO Brian Gladden Discusses Dell Q1 Fiscal Year 2010 Performance

Robert L Williams — Thu, 28 May 2009 20:15:00 GMT

Dell announced first-quarter fiscal-year 2010 financial results on May 28^th. Brian Gladden, Senior Vice President and CFO, discusses the results and the company's outlook. Please review earnings materials on the Dell Investor Relations Q1 events page. All comparisons are year-over-year unless otherwise noted.

We announced Q1 results today. Revenue was down 23% to $12.3 billion. EPS was $0.15 per share and cash from operations was $761 million.

I am pleased to have Brian Gladden join us on Dell Shares to provide his view on the first quarter, the economy, industry demand, and the company's outlook.

(Please visit the site to view this media)

Also, we strongly encourage investors to read the full press release and earnings presentation; and listen to our conference call that can be found on the investor relations web site. As always, we encourage you to ask questions or leave comments on Dell Shares.

Jeff Clarke, Vice Chairman, Technology and Operations, Discusses Progress on $4B Cost Initiative

Robert L Williams — Fri, 17 Apr 2009 14:50:00 GMT

I recently sat down with Jeff Clarke, Vice Chairman, Technology and Operations, to discuss a range of topics that have received investor attention including:

Declining Client ASPs in the commercial customer business
Desktop and mobility virtualization
Progress on our $4 billion cost initiative
Optimization of our global manufacturing and logistics network
What we are going to do with the savings we realize from some of these initiatives

As always, I look forward to your questions and comments!

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Dell's Competitive Position in Blades

Robert L Williams — Tue, 31 Mar 2009 16:10:00 GMT

Last week, we achieved yet another milestone in enterprise computing with the launch of our latest enterprise solutions - including our 11th generation PowerEdge servers, a new EqualLogic storage product, and new systems management capabilities. These offerings are specifically designed to help our customers become more efficient and maximize their return on investment in data centers. As part of this launch, we introduced 14 new enterprise products that help customers cut cost and complexity through simplified management, industry leading virtualization and innovative solutions. Two members of our executive leadership team, Steve Schuckenbrock, President, Large Enterprise, and Brad Anderson, Senior Vice President, Enterprise Product Group presented at the launch event in San Francisco on March 25^th.

In today's discussion, I am going to focus on our blade servers. Data centers today have faced increasing challenges as they have grown. The sprawl of many servers, plus the resulting challenges to power and cooling, has dramatically increased the role of blade servers. According to industry research firm IDC, in calendar Q4 of 2008, blades made up roughly 15% of the x86 server market by volume and Dell was ranked #3 worldwide with 9% market share. Per IDC, we grew our blade units by roughly four times the industry growth rate in calendar Q4 of 2008. IDC also projects that blades are expected to experience strong growth in the mid-twenty percent range from 2010-12.

With our M-series blades, the goal from the beginning was to design the most power efficient server enclosure in the world. Another driving force in data centers today is virtualization. Blades fit perfectly in a virtual environment as they take up less space than normal rack mount servers and together with virtualization, provide customers a physical and virtual consolidation to save data center space and ease management. Dell provides industry leading solutions for customers running virtualization. Our ability to boot directly to VMware software is also a key differentiator for us. Dell's virtualization servers provide 50% more DIMM slots in the M905 than any competitive four socket server and 33% more high speed I/O.

So how competitive are our blades? We hired a third party firm to run the exact same server configurations and benchmarks on Dell, IBM, and HP blade enclosures. The result showed that our existing M-series blades had up to a 19% power advantage, and up to a 12% performance advantage, over our nearest competitors. Last week, we announced some further enhancements to our M-series blade portfolio - our new blade architecture now has 27 percent lower acquisition cost and delivers 17 percent lower TCO (total cost of ownership) over 5 years per rack compared to HP's c-Class.

So from a competitive standpoint, we are very well positioned in the blade market space and we are the only vendor to provide fully modular switches allowing customers to grow their blade enclosure throughput as their data center needs grow. With our M-series blades, we also offer FlexAddress, which is a low cost way to keep the server's Ethernet or Fibre Channel connection when changing a blade. This can help reduce customer downtime and works with any switch infrastructure a customer uses today. Designed to solve the major challenges of any data center, our M-series blades can be the ideal way to unlock the optimal data center within a customer environment by maximizing the power, cooling, and consolidation needs of today and tomorrow.

As always, we encourage you to ask questions or leave comments on Dell Shares.

Anticipated Q4 Expense Items Toward $3 Billion in Cost Reductions

Lynn Tyson — Wed, 28 Jan 2009 20:45:00 GMT

In March last year, we announced actions to enhance the company's competitiveness, improve our cost structure and optimize operations. At that point, we announced the closure of desktop manufacturing in Austin. More recently, we announced a new global segmentation and the migration of computer systems production in EMEA to Dell facilities in Poland and contract manufacturers by the beginning of Dell's fiscal 2011. The combination of these efforts, in addition to a revitalization of our entire product and service portfolio , continue to help us drive toward delivering on $3 billion in annualized cost savings by the end of fiscal 2011.

Today we announced that we expect to recognize in our fiscal 2009 fourth quarter a pretax expense of $135 million associated with further optimizing our global manufacturing and distribution network, and the continued rationalization of Dell's workforce.

In addition, we will incur $145 million in pretax, non-cash stock option expense, including $106 million in accelerated vesting of previously awarded stock options. Dell routinely evaluates its compensation program, including the use of stock options. The acceleration, effective Jan. 23, covers 20.4 million shares with a weighted-average exercise price of $22.02. The action means Dell will recognize all expenses associated with these options in Q4, rather than over time. This action is a non-cash expense based on SFAS 123R stock option accounting. The remaining $39 million of stock expense is related to an annual true-up of full-year stock-based compensation forfeitures.

Together the cost-reduction and stock-option actions will total pretax $280 million, or 11 cents per share. The company will announce its Q4 and full fiscal-year 2009 financial results on Feb. 26.

Brian Gladden, CFO, Sits Down to Discuss Dell's New Global Segmentation and Business Units

Robert L Williams — Tue, 13 Jan 2009 14:46:00 GMT

Thanks for joining us on Dell Shares. I recently sat down with Brian Gladden, Senior Vice President and CFO, to discuss our recent announced actions to further globalize our operations around four key customer segments including large enterprise, public, and small and medium businesses. In this conversation, I ask Brian about what this new organization means for Dell, its customers, and why now was the right time to make this change. We also touch base on the impact of this announcement on our financial statements and reporting structure and how this affects our broader cost savings initiatives.

I invite you to watch the v-log. We will respond to your questions and comments posted on this blog site as well as via email and over the phone. We look forward to hearing from you! Thanks!

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3Q Earnings - Executive Q&A

Lynn Tyson — Thu, 20 Nov 2008 21:05:00 GMT

Chairman and CEO Michael Dell and CFO Brian Gladden Discuss Dell Q3 Fiscal Year 2009 Performance Dell announced third-quarter fiscal-year 2009 financial results on Nov. 20. Michael Dell , chairman and CEO, and Brian Gladden , discuss the results and the...(read more)

Dell Maintains Ownership of Dell Financial Services

Lynn Tyson — Tue, 16 Sep 2008 16:00:00 GMT

On March 31^st we announced several actions we were undertaking to improve the overall competiveness of the company. One of these actions included a strategic assessment of ownership alternatives for Dell Financial Services (DFS), focused primarily on the consumer and small/medium business revolving credit financing receivables and operations in the U.S.

We conducted this assessment to evaluate whether: (1) DFS could provide enhanced products and services, (2) we could accelerate the investments we are making in DFS and, (3) or whether there were more efficient ways to fund DFS.

We have now completed this assessment and have decided that Dell should continue its ownership of Dell Financial Services as a wholly-owned subsidiary of Dell. We believe that our current approach is in the best interest of our customers and our company. We are committed to continued investment in our financing business to expand its product portfolio and provide financing solutions that enable and enrich our customers' experiences.

DFS's key activities include the origination, collection, and servicing of customer receivables related to the purchase of Dell products. To learn more about DFS, please refer to Note 5 "Financial Services" of our recently filed fiscal year 2009 10Q.

Dell Sees Further Softening in Global End-User Demand

Robert L Williams — Tue, 16 Sep 2008 11:00:00 GMT

When Dell announced Q2 financial results on Aug. 28, 2008, we reported continued conservatism in IT spending in the U.S., which had extended into Western Europe and several countries in Asia. The company is seeing further softening in global end-user demand in the current quarter and we felt it was important to share that with investors.

Dell will continue to execute against its five growth priorities of global consumer, small and medium business, enterprise, notebooks and emerging countries. The company expects to incur costs as it realigns its business to improve competitiveness, reduce headcount and invest in infrastructure and acquisitions, but is committed to working aggressively on cost initiatives that will benefit its P&L over time with improved growth, profitability and cash flow. The company grew unit shipments faster than the industry in the first half of calendar 2008 and expects to grow faster than the industry for the full year.

In addition, Dell Senior Vice President & CFO, Brian T. Gladden, will address investors at the Bank of America Conference in San Francisco today, Tuesday, September 16. Brian will talk about the company's strategic priorities and then take questions from the audience. Brian's remarks will be Webcast live at 1:00 p.m. CT, and then be accessible via replay online at http://www.dell.com/investor. I encourage you to listen in. In addition, the company will report third quarter fiscal year 2009 results Nov. 20, 2008, after the close of market.

2Q Earnings – Optimizing for Growth, Profit and Cash Flow Over Time

Robert L Williams — Thu, 28 Aug 2008 18:01:00 GMT

All comparisons are year-over-year unless otherwise noted. Industry growth rates exclude Dell.

We announced Q2 results today. Revenue was up 11% to $16.4 billion on 19% unit growth. EPS were down 6% to $0.31 per share and cash from operations was $1.1 billion and $3.4 billion on a trailing four quarters basis. We strongly encourage investors to read the full press release and earnings presentation; and listen to a replay of our conference call that can be found on the investor relations web site after the earnings call.

This quarter we enhanced our competitiveness by introducing a more robust enterprise solutions portfolio, a new commercial notebook line and expanding our product portfolio in consumer, including our new Studio brand of desktops and notebooks. Again this quarter we saw share gains in all major product categories and regions including rapid growth in BRIC and emerging countries. Global Consumer revenues grew 28% on unit growth of 53%, and BRIC revenues were up 46% on unit growth of 41%.

Our gross margins were 17.2% of revenue this quarter. In EMEA we took strategic pricing actions ahead of cost improvements. In EMEA we also increased the deferral of service revenue which was driven by some changes in how we market our service offerings in the region. While this had a negative impact on reported profit in the quarter, it was neutral to cash and the revenue and profit will be recognized in future periods. Gross margins were also impacted by the retail mix shift in our consumer business as we continue to expand our global footprint.

We also saw an improvement in opex of 70 basis points sequentially and 160 basis points year-over-year, reflecting some of the progress we've made towards our $3 billion in cost initiatives.

We are balancing growth & profitability -- optimizing for growth, profit and cash flow over time. Re-igniting demand can be an imprecise process, we believe we are building momentum and cost improvements should be more evident in the back half of this year -- which is what we said in April. Our strategy to grow is fueled by confidence in our ability to harvest the cost improvements over the long-term. This three year time horizon allows us to take a "long view" of our business and maximize growth and profitability in that time frame.

There is a clear line of sight to $3B of annualized cost savings. We are targeting three key areas of total cost; in order of size they are: product cost & materials, opex, and manufacturing and logistics. We have detailed plans for savings, actions, and executive ownership with visibility out to the full three years, including bi-weekly interlock meetings now chaired by our CFO, Brian Gladden. And, we feel that we have sufficient room to improve operating income as we improve gross margins and opex.

Finally, scale is important. Over the next four years global IT spending will approach $1.5 trillion. Scale here is important because $1 of hardware spend pulls about $2 in additional spending -- this is one reason why unit growth matters for Dell. In this regard, we are pleased with our broad based growth in the global commercial business. In the past year, this business generated nearly $53 billion in revenue and $3.7 billion in operating income. And we have been the #1 provider of commercial systems worldwide for eight years running.

Beyond delivering hardware, today we are partnering with customers to solve pressing issues and deliver more end-to-end solutions. Our sales, onsite systems engineering, high-availability database, and ProSupport service teams are helping customers manage everything from starting up and consolidating data centers to delivering flexible computing platforms running off of virtualized servers and storage.

This growth in our enterprise portfolio demonstrates that customers are increasingly confident in our ability to design and support complete solutions. As a result, they are expressing interest in a deeper direct relationship -- one that we hope to foster for years to come.