Sales are vanity for Dell as it trims revenue forecast

Dell slashes sales outlook for its full year as it continues low-margin product exodus

The rate at which Dell is reshaping its business in favour of higher-margin technology was thrown into stark relief in a second-quarter conference call last night.

Although the tech giant's Q2 revenue inched up just one per cent year on year to $15.7bn (£9.5bn), its net profits surged 63 per cent to $890m.

Dell also slashed its full-year revenue growth outlook from between five and nine per cent to one and five per cent, while raising its operating profit growth expectations from 12 to 18 per cent to 17 to 23 per cent.

On the call, a transcript of which can be found here, Dell signalled that its decision to eliminate low value-added revenue from its portfolio was unquestionably affecting its revenue growth.

"But that is a trade-off we are willing to make," said chief financial officer Brian Gladden.

"We continue to eliminate lower-margin business that is not strategic to the company long term. Specific examples of this include exiting lower-value reseller business in both storage and software, as well as unfavourable retail and reverse-option deals in our client business."

Enterprise solutions and services revenue grew four per cent to $4.6bn, client revenue fell one per cent to $8.5bn, while software and peripherals grew one per cent to $2.6bn.

From a regional perspective, EMEA revenue inched up by one per cent, Americas fell four per cent and Asia-Pacific grew 17 per cent.

By customer segment, large-enterprise revenue rose one per cent to $4.6bn (with servers rising five per cent and services by 11 per cent) and public sector fell three per cent to $4.5bn. SMB grew five per cent to $3.7bn and consumer rose one per cent to $2.9bn, driven by strong growth in EMEA.

Dell chief executive Michael Dell (pictured) said he was pleased with the vendor's progress in the first half. He added, in response to an analyst question, that he was intrigued by the impact Google's acquisition of Motorola Mobility could have on the competitive landscape.

"They have not said a whole lot about it, but I think certainly patents play a big role here," he said.

"And having Android with a stronger ability to exhaust patent claims against it probably sets up an interesting competitive dynamic. We are still quite interested in Android. I'll also tell you that our early work on Windows 8 on the tablet side looks to be pretty encouraging. And so, we think it is shaping up to be a competitive environment."