Dell sees vital signs of corporate refresh

Dell has claimed "continued evidence" of a corporate refresh cycle at the desktop level as demand for Dell products among large enterprises closed in on pre-recession levels.

The hardware giant reported an overall revenue increase for the second quarter of fiscal year 2011 to US$15.5 billion, up 22 percent compared to the same quarter a year ago.

Large enterprise revenues grew 38 percent to $4.5 billion, the fourth quarter of sequential growth, according to Dell's president of large enterprise Steve Schuckenbrock.

"Server growth led all categories except services with a revenue increase of 54 percent driven by customers taking advantage of positive ROI projects along with another strong quarter in our data centre solutions business," he told financial analysts.

"Storage was up 14 percent and we had a signficantly improved profitability as customers continue to adopt our EqualLogic [storage] solutions.

"We're [also] seeing continued evidence of a corporate refresh cycle as notebooks and desktop revenue were up 51 percent and 35 percent respectively. With a significantly aged install base and a relatively low Windows 7 migration, we expect these general trends to continue well into the next few quarters."

Commercial Dell services grew 68 percent to US$1.8 billion for the quarter "driven by the integration of Perot [Systems]", Schuckenbrock said.

He was particularly vocal about the ongoing work Dell had undertaken integrating acquired businesses with its own offerings.

"Let me state that Dell has not been this integrated and aligned on how to drive solutions ever in its history," he said.

"It is exciting to see this comprehensive approach and the thousands of employees in the company that support and execute on solutions every day, and it is also important that our customers recognise us as one team - and that's happening."

Public, small and medium business revenues also climbed during the quarter - but it was not all good news.

"Consumer revenue was flat at US$2.9 billion. Operating income was a US$21 million loss. The company remains confident that initiatives underway will improve operating margins for the segment," Dell reported.

"We continue to see challenging dynamics in our supply chain costs which pressured our gross margins and consumer profitability," chief financial officer Brian Gladden said.

"We continue to have confidence that we'll improve gross margins in the second half as we see a better cost component environment and we execute operational improvements in our consumer business."