Fiscal Year 2011 Third Quarter Financial Statements in PDF format

  • Revenue for commercial enterprise products and services up 33 percent
  • Operating margin of 6.7 percent on a GAAP basis
  • Strong cash flow generation of $913 million; nearly $4 billion over the last four quarters


Global demand for all commercial products and services and solid supply-chain execution led to strong operating income for Dell in its third fiscal quarter, with GAAP operating income of $1.02 billion and record earnings per share of 42 cents. On a non-GAAP basis, operating income was $1.17 billion, or 45 cents per share.

The robust profit results came on a 19 percent increase in revenue to $15.4 billion, as commercial and enterprise sectors continue to be solid. Year to date, the company’s revenue has grown 21 percent to $45.8 billion.

Fiscal-Year 2011 Third Quarter Highlights

(in millions) FY11 FY10Change
Revenue$15,394$12,89619%
Operating Income (GAAP)$1,024$57777%
Net Income (GAAP)$822$337144%
EPS (GAAP)$0.42$0.17147%
Operating Income (non-GAAP)$1,167$74058%
Net Income (non-GAAP)$875$44995%
EPS (non-GAAP$0.45$0.2396%

Information about Dell’s use of non-GAAP financial information is provided under “Non-GAAP Financial Measures” below. Non-GAAP financial information excludes costs related primarily to the amortization of purchased intangibles, severance and facility-action costs, a merger termination fee, certain settlement costs and acquisition-related charges. All comparisons in this press release are year over year unless otherwise noted.

Results

  • Revenue in the quarter grew 19 percent and is up 21 percent year to date.
  • GAAP operating income was $1.02 billion, 6.7 percent of revenue. Non-GAAP operating income was $1.17 billion, 7.6 percent of revenue.
  • Cash flow from operations was $913 million, and Dell ended the quarter with $14 billion in cash and investments.


Strategic Progress:

  • Strong operating leverage across all commercial business segments led to record profitability, with operating income at 10 percent of revenue. Revenue for the commercial business was $12.4 billion, up 24 percent.
  • Enterprise solutions and services revenue, which includes Perot Systems, was up 31 percent. The company’s EqualLogic storage business grew 66 percent.


Business Units and Regions:

  • Large Enterprise revenue was $4.3 billion, up 27 percent from a year ago. Operating income was $400 million, or 9.2 percent of revenue. Enterprise solutions and services revenue was $1.7 billion, a 25 percent increase, and client revenue increased 38 percent. Dell introduced its new virtual integrated system (VIS) architecture and services that help customers transition new and existing technologies to open, cloud-like models that dynamically provision application workloads, and unify heterogeneous data center assets into a more efficient common pool of resources.
  • Public revenue was $4.4 billion, a 20 percent increase (including the integration of Perot). Operating income for the quarter was $451 million, 10.2 percent of revenue. State and local government business in the U.S. represents approximately 9 percent of the total Public business, less than 3 percent of Dell revenue, and was up 5 percent in the third quarter. Dell built on its leadership as the No. 1 technology provider to the health care industry with key customer engagements at The Methodist Hospital in Houston, Western Maryland Health Systems, and in China, Shanghai’s Songjiang Hospital, to implement Electronic Medical Record (EMR) systems and diagnostic image transfers that help improve productivity and reduce operating costs.
  • Small and Medium Business revenue was $3.7 billion, up 24 percent. Profitability was at a record high, with operating income at $391 million, 10.7 percent of revenue, up 39 percent from last year . In the quarter, Dell introduced new PowerEdge servers, PowerVault storage, and PowerConnect networking solutions that help small and medium businesses affordably update technology infrastructures with easy integration, minimal downtime and the ability to scale.
  • Consumer revenue was $3 billion, a 4 percent increase. The segment improved to break-even operating income in the quarter, despite muted consumer demand. Dell introduced a new family of XPS laptops in the third quarter, featuring exceptional sound, video and 3D-capabilities. The company streamlined its Consumer offerings to three brands: Inspiron, XPS and Alienware during the quarter.
  • Asia-Pacific and Japan revenue grew 29 percent, EMEA increased 15 percent and the Americas were up 18 percent. Revenue in Brazil, Russia, India and China (BRIC) grew 30 percent overall, led by a 55 percent increase in India. The company continues to expand its presence in these important countries, which now represent 13 percent of total company revenue.


Quotes:

Michael Dell, chairman of the board and chief executive officer: “Our strong results demonstrate that we are listening to customers and delivering what they want. It validates that our strategy to offer choice and efficiency at every level of the IT enterprise computing stack is taking hold, and we are more focused than ever to being a true partner – not merely a provider – to our customers. Dell is growing in the right areas, and I’m very excited about our momentum.”

Brian Gladden, chief financial officer: “Our teams delivered outstanding results in the quarter. With solid demand in our commercial segments, we executed well and that led to record profitability for the company and especially in our important enterprise solutions and services business. We are pleased with our year-to-date revenue growth of 21 percent and non-GAAP operating margin of more than 6 percent. These results position us well for a very good financial year, and we remain focused on our commitment to deliver balanced revenue and operating income growth along with solid cash flow generation.”

Company Outlook:

The company expects to see continued strength from the ongoing client refresh among large corporate accounts and strong growth in enterprise products and services. Fourth quarter revenue is expected to track in-line to slightly up from the third quarter as commercial demand remains stable while consumer demand remains more muted. The company expects full-year revenue to track toward the mid-point of the 14-to-19 percent range set earlier in the year and non-GAAP operating income growth to be between 28 and 32 percent.

About Dell
Dell Inc. (NASDAQ: DELL) listens to customers and delivers worldwide innovative technology, business solutions and services they trust and value. For more information, visit www.dell.com. The third-quarter a nalyst call with Michael Dell, chairman and CEO; Brian Gladden, CFO; and, Steve Felice, senior vice president, Consumer and SMB business unit, will be webcast live today at 4:00 CST and archived at www.dell.com/investor. To monitor highlighted facts from the analyst call, follow on the Dell Investor Relations Twitter account at: http://twitter.com/dellshares. To communicate directly with Dell, go to www.dell.com/dellshares.

Non-GAAP Financial Measures:
This press release includes information about non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share (collectively the “non-GAAP financial measures”), which are not measurements of financial performance prepared in accordance with U.S. generally accepted accounting principles. In the following tables, Dell has provided a reconciliation of each historical non-GAAP financial measure to the most directly comparable GAAP financial measure under the heading “Reconciliation of Non-GAAP Financial Measures” and has presented a detailed discussion of its reasons for including the non-GAAP financial measures and the limitations associated with those measures under the heading “Use of Non-GAAP Financial Measures.” Dell encourages investors to review the reconciliation and the non-GAAP discussion in conjunction with Dell’s presentation of these non-GAAP financial measures.

Special Note:
Statements in this press release that relate to future results and events (including statements about Dell’s future financial and operating performance, anticipated customer demand, including seasonal trends and client refresh timing and scope, enterprise solutions strategies, component costs, cost controls, retail agreements, channels, supply chain improvements, and new products, as well as the financial guidance with respect to revenue and non-GAAP operating income) are forward-looking statements and are based on Dell's current expectations. In some cases, you can identify these statements by such forward-looking words as “anticipate,” ‘believe,” “could,” “estimate,” “expect,” “intend,” “confidence,” “may,” “plan,” “potential,” “should,” “will” and “would,” or similar expressions. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including: weak global economic conditions and instability in financial markets; weak economic conditions and additional regulation affecting Dell’s financial services activities; intense competition; Dell’s cost-cutting measures; Dell’s ability to effectively manage periodic product and services transitions; Dell’s ability to effectively manage the growth of its distribution capabilities and add to its product and services offerings; Dell’s ability to achieve favorable pricing from its vendors; Dell’s reliance on third-party suppliers for product components, including reliance on several single-sourced or limited-sourced suppliers; disruptions in component or product availability; successful implementation of Dell’s acquisition strategy; Dell’s ability to generate substantial non-U.S. net revenue; Dell’s product, customer, and geographic sales mix, and seasonal sales trends; Dell’s ability to access the capital markets; loss of government contracts; customer terminations of or pricing changes in services contracts, or Dell’s failure to perform as it anticipates at the time it enters into services contracts; Dell’s ability to hedge effectively its exposure to fluctuations in foreign currency exchange rates and interest rates; counterparty default; unfavorable results of legal proceedings; Dell’s ability to obtain licenses to intellectual property developed by others on commercially reasonable and competitive terms; expiration of tax holidays or favorable tax rate structures, or unfavorable outcomes in tax audits and other compliance matters; Dell’s ability to maintain strong internal controls; changing environmental and safety laws; the effect of armed hostilities, terrorism, natural disasters, and public health issues; information technology and manufacturing infrastructure disruptions or breaches of data security; Dell’s ability to attract, retain, and motivate key personnel; the risk of temporary suspension or debarment from contracting with U.S. federal, state and local governments as a result of settlements of an SEC investigation by Dell and Dell’s Chairman and CEO; and other risks and uncertainties discussed in Dell’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for its fiscal year ended January 29, 2010 and its Quarterly Report on Form 10-Q for the quarter ended July 30, 2010. In particular, Dell’s expectations with regard to revenue and non-GAAP operating income for the full fiscal year ending January 28, 2011 assume, among other matters, that there is no significant decline in economic conditions generally or demand growth specifically, no significant adverse currency fluctuations which are unhedged, and no significant adverse component pricing or supply movements. Dell assumes no obligation to update its forward-looking statements.

Consolidated statements of income, financial position and cash flows and other financial data follow.
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