Dell Q1 net profit down nearly 33% at $635 million

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Leading computer maker Dell on Wednesday said its net profit declined by nearly 33 per cent to USD 635 million in the first quarter of 2012-13 ended April, 2012, impacted by flat performance in the Asia Pacific and Japan (APJ) region, including India. Net profit stood at USD 945 billion for the first quarter ended April, 2011.

Dell's fiscal year ends on the Friday nearest to January 31. The company's revenues also slipped four per cent to USD 14.42 billion in Q1 FY'13 from USD 15.01 billion in 2012. Dell president (APJ) Amit Midha said the performance of the region was impacted by India.

Though the company's revenues in Asia-Pacific and Japan remained flat, but that from China increased 9 per cent. Revenues in the BRIC (Brazil, Russia, India and China) countries increased by 4 per cent. Europe, the Middle East and Africa (EMEA) revenues was down one per cent in the quarter, while revenues from Americas was down seven per cent.

"The macro economic situation, currency impacted performance in India. Along with that the low priced computer orders by (state) government that we chose not to participate in affected performance in the country," Midha said on a conference call.

Midha said the company had chosen to not participate in the government-funded programme for procuring low-cost laptops because "it remains focussed on sustainable growth and profitability."

"There was a government order for 900,000 laptops to be provided at about USD 260 to citizens. That changed the game. We chose not to participate because it is not a part of the strategy. There has to be a balance between revenue growth and margins and we will focus on sustainable growth for our shareholders and our customers," Midha said.

The PC industry is being benefitted by Tamil Nadu's aim to give laptop to students of state-aided colleges and high schools to fulfill the pre-election pledge made by Chief Minister J. Jayalalithaa.

This is expected to add about 920,000 to total shipments in 2012 and is expected to be a major contributor for an estimated 17 per cent growth to reach 12.5 million units, according to research firm Gartner.

Without considering this particular deal, PC market is expected to grow 8.4 per cent in 2012. Dell expects second quarter global revenue to 'to be in line with historical seasonal trends and be up 2-4 per cent from first-quarter levels'.

Midha said the company continues to be cautiously optimistic about the Indian market. "India continues to modernise and we remain committed to this market.''

''Though currency fluctuations remain a concern, but business entities continue to invest in infrastructure.''

''And that gives us the confidence for the Indian market doing well," he added. Dell India has a workforce of about 27,000.

For the past four quarters, Dell has generated USD 4.9 billion in cash flow and ended the reported quarter with USD 17.2 billion in cash and investments, the company said in a statement.

While small and medium business revenue grew by 4 per cent to USD 3.5 billion, consumer business revenue declined 12 per cent to USD 3 billion.

Large Enterprise revenue was USD 4.4 billion in the reported quarter, a 3 per cent decline. Public sector revenue stood at USD 3.5 billion, a 4 per cent decrease, while Enterprise Solutions and Services (ESS) revenue increased 2 per cent year over year to USD 4.5 billion and contributed half of Dell's gross margin.

The ESS revenue grew 5 per cent excluding third-party storage. Dell Services revenue grew 4 per cent to USD 2.1 billion, while services backlog increased 9 per cent to USD 15.4 billion.

Dell-owned storage grew 24 per cent to USD 423 million. Server and networking revenue grew 2 per cent.