Dell had a tough second quarter with revenues down 8% as “deterioration,” proved worse than expected. Revenues were $14.5 billion compared to $15.7 billion in the same quarter last year. Third quarter revenues are expected to be down an additional 2 to 5%.
Dell’s poor results show how quickly the market is shifting to a post-PC economy. Reflecting that was the contrasting increase in the company’s server business. Dell reported that its enterprise solutions and services revenue grew 6% to $4.9 billion, and this revenue made up 34% of Dell’s consolidated revenue and more than 50% of its margin. Dell said that business is approaching a $20 billion annual run rate. Server and networking revenue grew 14 percent.
In the conference call, Dell executives were clearly unhappy about what they called “revenue deterioration” in the desktop and “mobility” markets. Deterioration was worse than expected and the company said the second half of the year will show much of the same strain on the overall business.
However, CEO Michael Dell said that enterprise demand is solid. Its line of Power Edge servers had continued strong sales. He said the company is starting to do complete data center sales as a focal part of its strategy.
In terms of mergers and acquisitions, Dell will close the Quest acquisition in the third quarter. Despite the poor results, Dell executives said there would be no change in strategy. Dell expects revenues to stabilize as there will be a higher-value mix of solutions with more predictable revenue and margin streams.