Dell Makes Cash, Not Profits: Fool by Numbers
By
Anders Bylund
February 29, 2008
|
On Feb. 28, computing giant Dell (Nasdaq: DELL) released fourth-quarter 2008 earnings for the period ended Feb. 1. Let's see how the company measured up to our expectations.
- Dell shipped out 19% more hardware units this quarter than it did a year earlier. But for various reasons, the average selling price slipped about 8% to land the total revenue improvement at 10.5%.
- One of those reasons is proportionally higher sales in emerging markets like China, Russia, and Brazil, where low margins come with the territory.
- While the GAAP numbers may look bleak, Dell is actually making more cash this year than last, including a much stronger structural cash flow of $833 million in the quarter.
(Figures in millions, except per-share data.)
Income Statement Highlights
|
Q4 2008
|
Q4 2007
|
Change
|
|
Sales
|
$15,989
|
$14,470
|
10.5%
|
|
Net Profit
|
$679
|
$726
|
(6.5%)
|
|
EPS
|
$0.31
|
$0.32
|
(3.1%)
|
|
Diluted Shares
|
2,201
|
2,251
|
(2.2%)
|
Get back to basics with the income statement.
Margin Checkup
|
Q4 2008
|
Q4 2007
|
Change*
|
|
Gross Margin
|
18.8%
|
17.1%
|
1.7
|
|
Operating Margin
|
4.9%
|
5.7%
|
(0.8)
|
|
Net Margin
|
4.2%
|
5.0%
|
(0.8)
|
*Expressed in percentage points.
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets
|
Q4 2008
|
Q4 2007
|
Change
|
|
Cash + ST Invest.
|
$7,972
|
$10,298
|
(22.6%)
|
|
Accounts Rec.
|
$5,961
|
$4,622
|
29.0%
|
|
Inventory
|
$1,180
|
$660
|
78.8%
|
|
Liabilities
|
Q4 2008
|
Q4 2007
|
Change
|
|
Accounts Payable
|
$11,492
|
$10,430
|
10.2%
|
|
Long-Term Debt
|
$362
|
$569
|
(36.4%)
|
The balance sheet reflects the company's health.
Cash Flow Highlights
|
Q4 2008
|
Q4 2007
|
Change
|
|
Cash From Ops.
|
$1,197
|
$1,221
|
(2.0%)
|
|
Capital Expenditures
|
$195
|
$330
|
(40.9%)
|
|
Free Cash Flow
|
$1,002
|
$891
|
12.5%
|
|
Owner Earnings
|
$833
|
$525
|
58.7%
|
Free cash flow is a Fool's best friend.
Competitive Context
|
Market Cap
|
Trailing P/E Ratio
|
CAPS Rating
|
|
International Business Machines (NYSE: IBM)
|
$158,540
|
15.9
|
***
|
|
Hewlett-Packard (NYSE: HPQ)
|
$123,190
|
16.1
|
****
|
|
Apple (Nasdaq: AAPL)
|
$112,740
|
28.1
|
***
|
|
Dell
|
$46,160
|
15.5
|
**
|
|
Sun Microsystems (Nasdaq: JAVA)
|
$15,160
|
20.0
|
***
|
Using the latest reported numbers from Capital IQ. Keep your partners close and the competition in your vest pocket.
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