For the past four quarters, Dell (NASDAQ:DELL) has generated $4.9 billion in cash flow. The company recently reported results with revenue of $14.4 billion, slipping 4 percent y-o-y. GAAP earnings per share in the quarter were 36 cents, down 27 percent from the previous year while cash used in operations in the quarter was $138 million. [1] Dell ended the quarter with $17.2 billion in cash and investments. Its major competitors are IBM(NYSE:IBM) and HP (NYSE:HPQ) – the global leader and Dell’s rival in the PC market.
See our full analysis on Dell
Short Term Pain As Business Model Changes
The sizable cash and investments could be used for used for acquisitions and product development such as the Windows 8 tablet as Dell changes its business model to focus on services. Its focus on enterprise and service was shown by the fact that Enterprise Solutions and Services revenue grew 2 percent year over year to $4.5 billion. Dell Services division (including Perot Systems) grew 4 percent with a 9 percent increase in order backlogs, storage products grew 24 percent, and its server and networking grew 2 percent. Consumer revenue was $3 billion, a 12 percent decline y-o-y. [2]
Outlook And Guidance
The company expects Q2 revenues to be in line with historical seasonal trends and be up 2-4 percent from the Q1 levels which would mean a revenue of $14.7 billion to $15 billion. We believe that the revenues however may pick up faster than expected as the effect of its recent acquisitions begin to contribute.
Recently, Dell acquired Clerity, Make, Wyse Technologies and SonicWall, providing a foothold in virtual desktops and thin clients as well as networking, security and firewalls. It can also leverage its Force10 acquisition to challenge networking companies such as Cisco and Juniper. All of these companies came with large client base and mature distribution channels that will compliment Dell’s sales reach and capabilities. Weakening sales in Europe are a point of worry with Dell reporting EMEA revenue down 1 percent.
We currently have a $20.48 Trefis Price Estimate for Dell which is much higher than current price estimates.
Understand How a Company’s Products Impact its Stock Price at Trefis
Notes:- DELL SEC Filing, www.sec.gov, May 22, 2012 [↩]
- Dell Earnings Reflect A Company In Transition, channelnomics.com, May 23, 2012 [↩]
