Dell Q2 profit dips 18%, India revenues down 30%

Company's revenues dropped 8% to $14.48 bn in Q2 of FY'13 from $15.65 bn in year-ago period

Computer maker Dell has reported 18% drop in net profit to $732 million in the May-July quarter of this fiscal, which saw 30% dip in India revenues - sharpest fall in the Asia Pacific region.

In the corresponding period a year ago, the company had posted a net profit of $890 million.

Dell follows February-January fiscal year, which ends on the last Friday of the month.

The company's revenues also dropped 8% to $14.48 billion in the second quarter of FY'13 from $15.65 billion in the year-ago period, Dell said in a statement.

The company had guided second quarter revenues to be up 2-4% from first-quarter levels of $14.42 billion.

Though Dell expects continued "solid growth" in Enterprise Solutions, Services and Software, an uncertain economic environment, competitive dynamics and soft Consumer business may impact third-quarter revenues to be down 2-5% from second-quarter levels, it said.

Once the world's top PC maker, Dell is now struggling to defend its market share against rivals like Acer and Lenovo and tablets like Apple's iPad.

Revenue in Americas was down 6%, while that from EMEA and Asia Pacific and Japan (APJ) was down 7% and 12% respectively.

Revenue in BRIC countries also dipped 15%.

Dell President (APJ) Amit Midha said revenues from India declined 30%, the highest drop in the APJ region, on the back of adverse currency movement.

Revenues from China dipped 14%, while that from Australia and New Zealand dipped 6%.

"The revenues from all business segments in India declined double digit. Currency has moved 25% in the one year, which clearly impacted us. However, India is a strong market for us and is also a hub for manufacturing, research and development and services for our global business as well," Midha said on a conference call.

Dell is still the largest player in India in terms of revenue and the performance should improve in the future, he added.

The company, as a strategy, has chosen to not participate in the lower end (lower priced products) of the market.

"We believe that the strategy to focus on mid and high-end products and deliver quality service to our customers will help us in the coming quarters," Midha said.

Dell did not participate in the Tamil Nadu government-funded programme to give laptops to students of state-aided colleges and high schools.

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

Dell's revenues in Enterprise Solutions and Services business grew 6% year-on-year to $4.9 billion and comprised 34% of Dell's consolidated revenue in the April-June 2012 quarter.

"We're transforming our business, not for a quarter or a fiscal year, but to deliver differentiated customer value for the long term. We're clear on our strategy and we're building a leading portfolio of solutions to help our customers achieve their goals," Dell Chairman and CEO Michael Dell said.

The company's server and networking revenue grew 14%, while that from Dell-owned storage business increased 6%.

Dell Services revenue was $2.1 billion, up 3%, with new signings of more than $1 billion in the first half of the year, and $1.8 billion over the last 12 months.

Year-to-date, Dell has announced six acquisitions and closed five, all of which will help drive a higher-value mix of solutions with more predictable revenue and margin streams, the statement said, adding that Dell expects to close the pending acquisition of Quest Software in the second half of the third quarter.

Growth in PC business has been challenging, as Dell saw a tough macroeconomic and competitive environment, and continued to focus on higher-value solutions in this business.

Revenues from Large Enterprise business was $4.5 billion in the quarter, a 3% decline, while Enterprise Solutions and Services revenue increased 9%.

Public revenue was $4.1 billion, a 6% fall, while Server and networking revenue increased 4%.

Small and Medium Business revenue stood at $3.3 billion, a 1% decline, while consumer revenue was $2.6 billion, down 22%.

Cash flow from operations in the reported quarter was $637 million and Dell ended the quarter with $14.6 billion in cash and investments.

Dell has been trying to expand its enterprise computing business, where Hewlett Packard is a major rival. It has roped in former HP networking executive Marius Haas as president of Enterprise Solutions.

Haas will lead the Dell business providing customers datacenter infrastructures and will be responsible for worldwide engineering, design, development and marketing of Dell enterprise products, the statement said.

He succeeds Brad Anderson, who has led Dell's Enterprise Solutions since joining the company in 2005.