Dell delivers strong performance with record Q4 revenue, earnings

Dell achieved record revenue of $15.2 billion and earnings of 43c per share driven by growth in enterprise products and services and sales outside the US in the fiscal fourth-quarter 2006.

Dell`s enterprise business in the quarter - including storage, servers, services and related software and peripherals - increased worldwide by 21% year-over-year. Storage revenue was up 41% year-over-year. Dell`s business outside the US increased in the quarter by 21% year-over-year, reflecting Dell`s success in growth areas of Europe and Asia Pacific.

Dell`s fourth quarter revenue of $15.2 billion was a 13% year-over-year increase. Earnings per share was 43c, a year-over-year increase of 65% and 16% on a non-GAAP basis. Revenue and EPS exceeded expectations. Revenue was up due in part to a stronger than expected impact of the extra week of sales in the quarter. EPS reflected an adjustment to a lower tax rate for the year because of a larger mix of profits from outside the US.

Revenue for the fiscal year was $56 billion, a 14% increase. EPS for the fiscal year was $1.46, a 24% increase. Non-GAAP EPS, which excludes certain charges and an income tax benefit that occurred during fiscal 2006 and an income tax charge in the fourth quarter of fiscal 2005, increased 21% to $1.56.

Table

1 See footnotes on financial table: Itemised reconciliation between net income on a GAAP and non-GAAP basis.

"We drove a better balance across all price points of our products and greater operational efficiencies this quarter, and performed at the high level of execution we expect for ourselves," said Kevin Rollins, Dell`s chief executive officer. "Our success in countries such as China and Germany shows the Dell direct business model is preferred by customers in all regions and provides us with a unique advantage and opportunity for continued growth."

Cash flow from operations was $1.6 billion for the quarter and $4.8 billion for the fiscal year. Dell ended the quarter with $11.7 billion in cash and investments. During the quarter, Dell spent $2 billion to repurchase 66 million shares of common stock, reducing weighted average shares outstanding by 7% year-over-year. For the full year, Dell spent $7.2 billion to repurchase almost 205 million shares, which was more than four times the number of options that were granted during the year.

The company expects first quarter fiscal year 2007 revenue of $14.2 billion to $14.6 billion and earnings per share of 39c to 41c, excluding an estimated 3c of stock compensation. Dell begins reporting earnings including stock compensation expense in the first quarter of fiscal 2007. The company plans to repurchase at least $1.2 billion in stock during the next quarter.

Sales outside the US were at an all-time high of 43% of the company`s overall revenue for the fourth quarter, up from 40% in the previous quarter. The company gained share in every region during the year.

Asia Pacific and Japan (APJ) increased revenue in the quarter by 21% and units by 27% year-over-year. In China, units grew 28% year-on-year with strong profitability, demonstrating that the direct model can excel in all regions of the world. Dell has begun shipping product from its second manufacturing facility in Xiamen, China, to meet the growing demand in the region.

Revenue in Europe, Middle East and Africa (EMEA) was up 18% year-over-year and Dell increased its share in 16 of 19 direct countries in the region. Shipments increased 25% year-over-year, led by an increase of 54% in mobility products.

Sales in the Americas were up 10% year-over-year, with the countries outside the US increasing revenue 33% year-over-year. Corporate revenue in the US, including small and medium businesses, was up 12% year-over-year as business customers continue to refresh and upgrade their IT infrastructures.

Dell continued to hold the number one worldwide share position. Dell shipped 37 million units in the year, a 19% increase over the previous year, and a record 10.2 million units in the fourth quarter, a 15% year-over-year increase.

The transition to mobility products worldwide resulted in revenue increases of 22% on shipment increases of 47% year-over-year. Dell increased storage revenues 41% year-over-year. Shipment of servers increased 11% year-over-year, with strong growth in EMEA and APJ. Revenue for enhanced services was up 26%.

Revenue for imaging products was up 17% year-over-year as Dell moved its focus from single-function inkjets to colour laser and all-in-one inkjet printers. Consumable revenue continued to grow and contribute more to overall imaging revenue, driving stronger profitability.

Dell announced its first dual-core, widescreen notebook during the quarter, one of three new products that deliver previously unavailable features to enhance customers` experience in high-end gaming and mobile productivity. Dell announced the Inspiron E1705 with Intel Core Duo processors and a 17-inch display, the XPS 600 Renegade desktop gaming system and a 30-inch LCD monitor, all providing extreme performance. Dell XPS desktop and notebook shipments were up 20% year-over-year, which helped to drive a richer mix of product sold in the consumer business.