Angela,
The earnings are quite solid. The high growth areas, enterprise and portables, have higher profit margins than desktops, and so the result is an increase in gross margins. That, in connection with stable fixed costs means that operating income grows faster than revenues. I will try to have a more thorough financial analysis of the results later this evening. Note that in spite of the fact that cash and investments increased by about $500 MM to about $4.7 BB, ROIC actually increased to 260% from 217% for the same period a year ago. This is a truly remarkable performance, and a tribute to a phenomenal business model.
But we must temper our enthusiasm a bit, because revenue growth is now 42% per year, and we can expect that growth to diminish as Dell captures more market share. Now, the question is what will Dell be using its huge cash hoard for?
Diluted earnings per share are the earnings divided by the number of shares outstanding plus all of the stock options that have not yet been exercised. Note that Dell repurchased a net 61MM diluted shares over the past year, although on a non-diluted basis the net repurchase was only 11 MM. Stock repurchases have the effect of boosting earnings per share compared to net income. Thus, net income increased by 47% yoy while eps increased 58%.
TTFN,
CTC |
