A superior cost structure allowed the company to simultaneously gain three points of overall global market share and increase gross and operating margins. Dell was the only top-10 computer company to increase total product shipments in the quarter. Analysts said the company gained four points of global server share, seven in the United States. Shipments of Dell notebook computers were up 18 percent, and the company led that worldwide category for the second straight quarter.
For the period, which ended Nov. 2, Dell reported net income of $429 million, or 16 cents per share, on revenue of $7.5 billion.
Over the past four quarters, Dell has added six points of overall U.S. market share, from 20 to 26 percent; to grow from 14 to 20 percent took more than two years. Dell’s operating-expense advantage over its closest competitor was 52 percent in the third quarter, up from 32 percent one year ago.
Mr. Dell said a combination of indicators suggest Q4 industry revenue will be down from the third quarter, with flat product shipments. He added that Dell expects its own fourth-quarter volumes to increase roughly 5 percent sequentially, with revenue up slightly. The company anticipates stable profit margins, with earnings for the quarter of 16 cents per share.
In the just-completed quarter, Dell’s gross margin and operating income were 17.6 and 7.3 percent of revenue, respectively, both up from the fiscal second quarter. Third-quarter operating expenses were 10.3 percent of sales, down from 11.4 percent in the prior year and equaling a company-record low reached in Q2.
Dell’s exceptional asset management generated nearly $1 billion in cash from operations–$4 billion over the past 12 months. Cash and investments at the end of the third quarter totaled $8 billion. Dell reduced inventory to the lowest dollar level in 14 quarters; four days of supply in inventory matched Q2’s record low.
Dell Again No. 1 in U.S. Servers, Advances Toward Top Worldwide
A 24-percent gain in PowerEdge server volumes allowed Dell to move closer to leadership in that global product category, closing the gap by more than two points since the second quarter, and by more than six points from last year’s Q3.
Dell server shipments in the U.S., where the company is already No. 1, increased 18 percent in a market that dropped 15 percent. Company server units were up 27 percent in a declining EMEA market; Dell growth in Asia-Pacific and Japan was four times the industry rate.
A recent study by International Data Corp. (IDC) indicated that the trend in customer acceptance of industry-standard servers and storage products, which form the basis of Dell’s enterprise-systems strategy, continues uninterrupted. By a factor of 10-to-1, customers told IDC that disadvantages in using standards-based products for midrange to high-end computing needs have been overcome, or will be soon. IDC said organizations that migrate earliest to standard products realize benefits of low cost, simplicity and the highest levels of return on investment.
Capacity of both total and external storage capacity shipped during the quarter was nearly double that of a year ago. External storage revenue rose to 46 percent of Dell’s category sales mix.
Dell believes it extended its position as the world’s No. 1 supplier of personal workstations during the quarter. Earlier this month, the company introduced the Dell Precision M40, its first mobile workstation.
The company’s share of worldwide shipments of notebook computers exceeded 15 percent for the first time in Q3, and analysts said Dell widened its leadership of the category. Total volumes of Inspiron and Latitude portable computers increased 18 percent; industry shipments fell 6 percent.
Dell’s services revenue in the quarter were $766 million, up 15 percent from last year. Total revenue from company services and peripheral products was $1.7 billion, up 16 percent and accounting for a record 23 percent of net sales.
In Europe, the Middle East and Africa (EMEA), third-quarter company shipments rose 21 percent in a market that was down 10 percent. Dell added nearly three points of market share year-over-year in regional server volumes. Dell’s European workstation shipments jumped 45 percent.
The company extended its momentum in strategically important Germany, posting a 48-percent gain in shipments–65 percent for servers, 60 percent in notebook computers–despite a 17-percent drop in overall industry volumes. Dell’s national revenue rose 13 percent.
Dell’s growth rate was highest in Asia-Pacific and Japan, where company shipments were up 28 percent in a market that declined 9 percent. Company server volumes in the region increased 37 percent. Sales in China and Japan, both key markets, climbed 16 and 11 percent, respectively.
Dell increased shipments in the Americas 2 percent from last year’s third quarter. U.S. volumes were up 1 percent, markedly better than the industry fall off of 19 percent. In the world’s largest national market, the company ranks No. 1 in workstations and both notebook and desktop computers, as well as servers.
