Dell dances past the IT sector with strong Q2

Texas two-step

While numerous rivals flounder around it, Dell continues to produce solid results with its most recent success coming in the second quarter.

Dell today reported $11.7bn in revenue - a company record for the second quarter and a total 20 percent higher than that posted in the same quarter last year. Dell's net income came in at $799m in the period compared to $621m last year. While competitors Cisco and HP also reported recent rises in revenue, both vendors spooked the market with warnings about potential slowdowns in spending. Dell, by contrast, said all is well.

"We saw very good corporate (spending)," said Dell's CEO Kevin Rollins. "And it continued pretty steadily throughout the entire quarter . . . We are not seeing some of the same things that others are."

Overall, Dell reported that product shipments rose 19 percent in the second quarter. A 44 percent rise in server shipments and 60 percent increase in storage revenue drove this growth. A strong performance in the EMEA and Asia/Pacific regions across most product categories also boosted the bottom line.

In the third quarter, Dell is looking for total revenue to come in at $12.5bn, which would be an 18 percent year-over-year increase. It also expects unit shipments to rise 21 percent. Dell expects component costs such as memory to fall in the coming months and plans to pass these reductions on to consumers in the form of cheaper computers.

A number of analysts have been concerned about the IT sector after a flood of mediocre earnings reports appeared from large software makers and after rivals such as Cisco and HP frightened the market. Dell, however, insisted that both corporate and government demand for its products remains solid.

Dell is often chided for being a banal entity when compared to the likes of HP, Sun Microsystems and IBM. It should, however, receive credit for spectacular consistency. Even during the technology downturn, Dell managed to produce well above average results and now that things have picked up a bit, it is separating itself from competitors.

Dell's product are about as sexy as the Wal-Mart clothing line, but it gets the job done for investors.

Along that line, Dell repurchased another $900m shares during the second quarter bringing its share repurchase total for the year up to $2bn. This is a major boost for shareholders who suffered as Dell granted a flood of options to employees during the boom. ®

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