As consumer sales decline, Dell sees silver in the cloud

Dell is reporting some success in its struggle to retool itself as a cloud and enterprise services provider, even as the company's consumer business continues to decline.

The company reported modest 5 percent revenue growth in its Dell Services and Enterprise solutions and services businesses Tuesday, but it said consumer product sales, which include laptops and PCs, were down 7 percent in its first quarter, ended April 29. Overall revenue wasn't much improved: US$15 billion for the quarter, up 1 percent year over year.

"The market itself is weaker than we had anticipated coming into the quarter," said Brian Gladden, Dell's chief financial officer, during a conference call for investors.

Thanks in part to a simplified product line and lower component costs for its consumer group, the company was much more profitable than expected, posting earnings of $0.55 per share, excluding charges such as acquisition costs. Analysts had been expecting earnings of $0.44 per share on revenue of $15.4 billion, according to a survey by Thomson Reuters.

When measured according to GAAP (generally accepted accounting principles), Dell's operating income was $1.2 billion for the quarter. GAAP earnings per share was $0.49. Investors liked Dell's big profit. They had bumped up shares of the company's stock (DELL) by more than $0.89 to $16.76 in after-hours trading late Tuesday.

With the global PC market shrinking, Dell has been betting its future on new services and data-center technologies, moving away from low-margin products such as inexpensive PCs and laptops.