Five Key Quotes from Dell on the PC Industry

Includes: DELL, HPQ, IBM
by: David Jackson

Here are five key quotes from Dell's conference call. They're taken from the Dell transcript which we published a few hours after the call ended:

1. A slowdown in the US?

In our America's commercial business, revenue increased 1% to $7.3 billion on a 3% increase in units... Similar to Q4, we continue to see conservatism in the U.S., especially in the financial sector as well as State and local governments and as well in the small and medium enterprise space... we are seeing conservatism in IT spending in the U.S. and that has extended modestly from global and large customers into public, small and medium business accounts and we expect that to continue through the summer, particularly as many of these customer segments are seasonally slower... We know that even the customers in sort of the most dire economic conditions have to upgrade their productivity tools, it is the last thing that they will cut. In fact, you know, the Enterprise business was strong as this is a place, if you look at data storage for example, data storage is not stopping. In fact, it continues to expand at an enormous rate...


2. Growth in emerging markets:

...worldwide consumer units were up 47% and APJ [Asia Pacific and Japan] and EMEA [Europe, Middle East and Africa] commercial units were up 31% and 30% respectively. Very importantly for us in the key so-called BRIC [Brazil, Russia, India and China] countries where over [14]% of the industry growth will come from in the next five years, we outperformed all major competitors across all product categories. We had revenue up 58% on a 73% increase in units. For us, BRIC now stands at close to 9% of our revenue mix. I should add our revenue mix from outside the United States reached a record high of 50%... Revenue in India and China grew at 52% and 30% on a 68% and 43% increase in units respectively... we are a leader in disruptive solutions for the cloud, powering about half of the fastest-growing Chinese Internet companies as well as the largest portal and the largest search engine providers in China.


3. Gaining market share from HP (NYSE:HPQ), IBM (NYSE:IBM) and others:

Worldwide, we grew units 22% while the industry was up 14%. Looking at our major regions, we grew 11% in the United States while the industry was essentially flat. In APJ we grew over 42% while the industry was up just 14% and in EMEA we grew 28% while the market was up 19%. This marks the first time in two years that we have outgrown the industry in all major regions. On the product side, in notebooks we grew 43% while the industry was up 36% and in servers we outgrew all major competitors with a 21% increase in units while the industry grew 7%. In desktops we were up 9% while the industry contracted in the quarter and in storage our growth revenues accelerated to 15%... We did have almost 37% share of the U.S. server opportunity, which was a peak, highest-ever share for us. I think Dell was one of the first companies to embrace virtualization on the server front a couple of years ago... we’ve had great success in cloud computing, both with the business, software as a service providers and a lot of the big Internet companies that Dell I think has won a disproportionate percentage of the large web-driven opportunities and continue to be focused on that.


4. Selling to consumers:

Dell has been kind of over-indexed to large commercial business around the world. Our growth opportunities are substantially or very significant in Consumer and emerging countries where average selling prices are in fact lower... We don’t break out Retail and Direct profitability, but suffice it to say Direct is a lot more profitable than Retail so we have a ways to go in Retail, there is absolutely no doubt about it. Ron and his team are highly focused on it. We are a long way from being ecstatic about our results... we have about 13,000 retail partners. We added about 2,000 during the first quarter. Costco here in the United States, Suning who is the number two consumer electronics retailer in China, Hontu and a variety of others in China as well. We added Best Buy in Canada... We believe China is going to become the largest retail market in the world for PCs. We, at the end of the first quarter, had about 1,800 stores selling Dell products in China, and the growth rate in units for the Consumer business in China was about 140%. We expect we will have about 3,500 stores by the end of the second quarter, selling our products in China.


5. Beating analyst estimates for the quarter:

In the first quarter, we generated $16 billion in revenue, a 9% increase on a 22% increase in units, that's obviously our fastest growth in units in over two years... On the OpEx front we had our best OpEx scaling versus revenue growth in over two years and OpEx dollars actually declined sequentially against an increase in both units and revenue. Our headcount is now down year-over-year by 7,000 excluding the impact of acquisitions and I think now well within striking distance of the 8,900 target that we talked to you about a year ago. As we said in April, we believe we have opportunities to reduce our headcount even further.


Meanwhile, Larry Dignan wrote a useful summary of Dell's results.