Profits are up but sales are down at Dell, another one of those companies that decided that the business market is more lucrative than consumers, who are even more conditioned by the likes of comparison-shopping sites like Bizrate, PriceGrabber and Nextag, deal sites like Woot and Groupon, and the reliability, convenience and selection of Amazon to shop around and go cheap on desktops and laptops that are increasingly viewed as commodity products.
Dell’s third-quarter net income rose 9%, although revenue remained flat from last year, and the company expects revenue for all of 2011 to be “near the bottom of its outlook range, which predicts revenue growth of 1% to 5% over 2010,” AP reports. Before August, in fact, the forecast was for growth in the 5% to 9% range. The third-quarter profit alone was 49 cents a share, up 17% from a year ago, on revenue of $15.4 billion.
The company will "walk away" from low-margin sales on notebooks that it views as "non-strategic," Kirk Ladendorf reports in the Austin American-Statesman, and will focus on profit margins. "We continue to see excellent momentum in our enterprise business with double-digit revenue growth in services, servers and networking, and in key growth countries, despite some macroeconomic uncertainty," says CFO Brian Gladden.
The consumer market represents 53% of Dell’s revenue –- still too much for analysts such as ISI Group’s Brian Marshall, Ladendorf reports. Dell is now the No. 3 manufacturer in the PC industry, behind Hewlett-Packard and Lenovo; it led the market as recently as 2006.
“[Dell] walked away from unprofitable business,” Robert W. Baird analyst Jayson Noland tellsBloomberg Businessweek’s Aaron Ricadela. “It sounds like HP got really aggressive on pricing.”
Ricadela reminds us that CEO Michael Dell told attendees at a company conference last month that the company plans to expand its presence in corporate and government data centers. “In a $3 trillion industry, there’s plenty of opportunity for us to grow,” Dell told analysts yesterday. As evidence, he pointed to annual R&D expenditures of nearly $1 billion this year, up from $661 million.
But Dell will be milling around the office cooler with a rather obstreperous colleague from the consumer market, Apple. Apple has been making peace with chief information officers, who founder Steve Jobs once disparaged as “orifices,” Nick Wingfield reports in the New York Times.
“What they’ve done in the past few years is really started thinking in a deeper way what the enterprise needs,” Rich Adduci, CIO of medical device manufacturer Boston Scientific tells Wingfield. The company already has purchased about 3,000 iPads for sales reps, and expects to buy 1,500 more by the end of the year.
“Apple, which declined to comment for this article, has begun to drop hints that it sees the corporate market as a big growth opportunity.” Wingfield writes. “During recent earnings calls with analysts, Apple executives have boasted about the portion of Fortune 500 companies testing or deploying iPads and iPhones -– 92% and 93% respectively, Apple said last month.”
Everyone from Alaskan Airline pilots to Siemens Energy wind turbine technicians are now using iPads instead of PCs. Notably absent from the stories about Dell’s results yesterday, however, was any mention of tablets. We know they sell them -- they’re even packaged for the corporate market: “Get the mobility and flexibility of a multi-touch screen tablet without sacrificing the power of an enterprise-class laptop PC. Stay productive in the office or in the field …,” reads the website copy for its Latitude XT3 Tablet PC.
That said, with the lack of any mention of the tablet business in reports this morning I’m left to guessing they’re not exciting the corporate market quite as much iPads. Not to mention consumes, 80% of whom would rather receive a tablet instead of a laptop as a holiday gift this year, according to a shopping survey conducted by PriceGrabber and reported by the Los Angeles Times’ Andrea Chang.
“Those who preferred tablets said they liked that they were easy to carry and transport, lightweight, convenient and had touchscreens,” Chang writes. The iPad got the nod from 83% of respondents, 5% favored new Amazon Kindle Fire, 4% wanted the Samsung Galaxy Tab and 2% are hoping for an HP TouchPad.
Where’s Dell in that equation? That’s a question analysts may be asking next time out as tablets gain in both the consumer and corporate markets.