Worldwide shipments of PowerEdge servers jumped 36 percent in a category that was up just 1 percent, as Dell gained four points of server market share-nearly eight in the US The company’s US server share ranked No. 1 for the second straight quarter. Volumes of Inspiron and Latitude notebook computers grew at three times the industry rate. And Dell’s 19-percent year-over-year increase in overall product shipments countered a worldwide industry decline.
Dell operating results for the quarter ended Aug. 3 were consistent with guidance provided at the start of the period. Second-quarter net income totaled $433 million, or 16 cents per share, excluding a pretax charge of $742 million for job reductions, consolidation of facilities and impairment of assets. Company revenue was $7.6 billion, down 1 percent from a year ago.
Company operating income was 7.2 percent of sales, essentially flat with Q1. A favorable mix of revenue from enterprise products, notebook computers and services bolstered Dell’s profits. Lower operating expenses (OPEX) largely offset a decline in second-quarter gross margins. OPEX in the quarter was 10.3 percent of revenue, the lowest rate in company history, down from 10.7 percent in the first quarter and 11.7 percent a year ago.
Revenue was significantly affected by further sharp reductions in component costs; those savings were quickly passed to customers through Dell’s direct business model. Continued intense price competition contributed to a drop in the company’s gross margin to 17.5 percent of revenue.
Cash generated from operations during the period was $951 million. At the end of Q2, cash and investments totaled $7.8 billion. Dell reduced inventory by $58 million from the first quarter to the second, and trimmed its supply to a record-low four days.
Dell extended its momentum in Europe, the Middle East and Africa (EMEA) during the quarter, as shipments increased 24 percent in a flat market and sales rose 2 percent. Company server volume in the region was up 47 percent, and shipments of Dell Precision workstations expanded by more than 70 percent.
Shipment growth by Dell Germany exceeded 50 percent despite a decline in industry volumes, and local revenue was up 24 percent. The company improved its national market-share ranking from No. 6 one year ago to No. 3.
Company unit and revenue growth was strongest in Asia-Pacific and Japan, where shipments increased more than 40 percent in an overall flat industry and sales rose 15 percent. Dell’s regional server volume grew 51 percent. Sales were up strongly in two strategically important markets: 31 percent in China, and 19 percent in Japan.
In the Americas, Dell shipments increased 14 percent, and regional revenue was down just 3 percent from the second quarter a year ago. In the U.S., where overall industry volume fell 11 percent, Dell shipments were up 13 percent and the company added nearly five points to its leading market-share position.
Combined revenue from Americas education, institutional and government customers was up 25 percent during the period. Shipments of computers to consumers increased 39 percent and associated revenue rose 17 percent. Dell also grew rapidly in other parts of the region, with unit volume increases of 76 percent in Brazil and 55 percent in Mexico.
