Dell’s profit triples as it looks beyond the PC

PC and enterprise hardware vendor Dell’s profits tripled in its most recent financial quarter, thanks in part to a cost cutting initiative in its supply chain.

In the three months ending 28 January 2011, the company’s net income rose to $927 million from $334 million in the same quarter of last year. Dell’s revenues grew 5% to $15.7 billion.

In 2009, the company revamped its supply chain, outsourcing the supplier engagement process and for the first time selling through retailers. That appears to have had the desired effect on profitability, although shortly after Dell was entered into the Forum of Private Businesses’ Hall of Shame for extending its supplier payment window from 15 to 65 days.

As he discussed the results with investment analysts, founder and CEO Michael Dell said the company is moving its focus away from the PC market towards IT services and enterprise systems. "The epicentre of the company has really shifted to these other areas and away from the PC," he said.

Dell entered the IT services market in 2009 when it acquired Perot Systems for $3.9 billion, and in 2010 acquired a number of enterprise systems vendors, including storage virtualisation supplier Compellent and cloud integration start-up Boomi.

This startegy has yet to impact Dell’s business significantly. The enterprise PC division was still its fastest growing, up 20% year-on-year, compared to just 5% growth in IT services.

But this will change in coming financial year, said Michael Dell. "If [fiscal year] 2011 was largely about getting operationally fit, then [fiscal year] 2012 is going to be about leveraging this position of health and strength to move more aggressively and accelerate our transformation as a services and solutions company."

Peter Done

Peter Done is managing director of Peninsula Business Services, the personnel and employment law consultancy he set up having already built a successful betting shop business.

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