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Dell Increases Revenue and Earnings, Lowers Operating Expenses5/29/2008
Company Gains Share in First Quarter Across All Major Product Categories and Regions$106 million in expense, or four cents per share, related to the realignment of our business, including severance costs and facility closures;
$26 million, or one cent per share, in amortization expense of purchased intangible assets;
$19 million in expense, or one cent per share, in investigation related costs;
A $42 million increase in financing and other income, or two cents per share, related to an error in currency exchange rates from prior periods;
A $46 million, or two cents per share, reversal in the provision for employee bonuses for fiscal 2008; and,
A reduction in a litigation reserve related to a favorable ruling in a patent case of $55 million, or two cents per share.
Dell today reported record fiscal first quarter revenue of $16 billion, a 9 percent year-over-year increase, and earnings of $0.38 cents per share, a 12 percent increase. The results were driven by better-than-industry growth of commercial and consumer products and services, and lower operating expense as a percent of revenue.
Product shipments in the quarter increased 22 percent, with servers growing three times the industry rate at 21 percent. Storage revenue increased 15 percent and enhanced services revenue was up 13 percent. Notebook unit growth, a Dell strategic priority, rose sharply at 43 percent and 1.2 times the industry growth rate. Consumer units grew at more than two times the industry rate and the company increased its global share by 1.2 points to 8.8 percent during the quarter.
“We are executing on all points of our strategy to drive growth in every product category and in every part of the world,” said Michael Dell, chairman and CEO. “These results are early signs of our progress against our five strategic priorities. Through a continued focus, we expect to continue growing faster than the industry and increase our revenue, profitability and cash flow for greater shareholder value.”
Earnings per share in the quarter were affected by the following items:
Dell’s headcount has been reduced by 7,000 in the past year – including a reduction of about 3,700 in the first quarter – or 8 percent before the impact of acquisitions. Dell has added about 2,700 employees through acquisitions, making the net reduction for the company about 5 percent.
Operating expenses were 12.9 percent of revenue for the quarter. Cash flow from operations was $143 million and impacted by lower payables and tax and bonus payments. The company still expects to generate cash flow from operations in excess of net income on an annualized basis. Dell ended the quarter with $9.8 billion in cash and investments and weighted average shares were 2.04 billion.
In the quarter, Dell issued $1.5 billion in private placement and medium- and long-term notes to be used for general corporate purposes. Dell spent more than $1 billion to repurchase 52 million shares of stock and plans to spend at least $1 billion on share repurchase in the second quarter.