Dell shares surge after strong Q1 earnings, upgraded forecast

Computer maker's net profit nearly triples despite decline in PC sales

Shares of PC maker Dell (NASDAQ: DELL) gained more than 5 percent in extended trading Tuesday after the company reported a near-tripling of first-quarter net income and raised its full fiscal year earnings guidance.

While shares were down slightly in regular trading to 15.90 -- a 10-cent drop -- the after-hours session saw Dell's stock climb more than 5 percent to 16.79, one penny short of its 52-week high.

Dell reported first-quarter net income of $945 million and a record earnings per share of 49 cents, a gain of 188 percent over last year's Q1 EPS. Revenue was $15.02 billion, up just 1 percent over last year's $14.87 billion.

On an adjusted basis, Dell's Q1 net income was $1.05 billion, or 55 cents a share, for the quarter ended April 29.

Consensus forecasts called for earnings of 43 cents a share on revenue of $15.4 billion.

While consumer revenue fell 7 percent to $3 billion, Dell reported a 5 percent increase in enterprise services revenue to $4.4 billion.

Dell's Large Enterprise division recorded record operating income of $504 million on $4.5 billion of revenue, up 5 percent from last year. And while sales of PCs to consumers were down, Dell said revenue from desktop and laptop computer sales to businesses grew 7 percent.

Overall, PC sales constituted slightly more than half of Dell's Q1 revenue. And despite the 7 percent drop in consumer PC revenue, profit for the unit "significantly improved with operating income of $136 million, or 4.5 percent of revenue, benefiting from a simplified brand structure," Dell said in a statement accompanying the earnings report.

Chief Financial Officer Brian Gladden said, "We continue to build momentum with our strategy to expand our enterprise solutions and services business, and it’s contributing to our strong financial results. We have built an $18 billion enterprise solutions and services business with exciting growth potential and our execution in the core client business continues to be very good."

Dell said it "expects mid-single digit revenue growth in its second quarter, which is slightly above normal, sequential seasonal growth of 2-3 percent." From the company's earnings statement:

The Public business is expected to benefit from stronger spending among state and local governments and education customers as they close out their fiscal year. The company also expects its Small and Medium Business and Consumer businesses will experience above average seasonality due to the timing of demand for Dell’s Sandy Bridge based offerings, a solid consumer back-to-school spending season and a refreshed portfolio of XPS products.

For the full fiscal year, Dell said it expects revenue growth of 5 percent to 9 percent and an increase in non-GAAP operating income growth to 12 percent to 18 percent. Previously Dell had forecast operating income growth of 6 percent to 12 percent.

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