Dell, Playing Catch-Up to IBM and HP, Shows Progress; PE Below 10
Dell (DELL) appears to be coming through on its promise to reduce its dependency on low-margin PC sales by expanding its services and software business.
For the fiscal third quarter, ended October 28, Dell’s revenue from services rose 6% to $3.05 billion, and represented about 20% of revenue. Product sales fell 2% to $12.31 billion.
Profit from services and software is similarly growing, with the segment's operating profit as a percentage of sales at 31% compared with 27.3% in the first fiscal quarter of the year.
The company's stock price is on the move after lagging last year, particularly when compared with other tech giants, including Hewlett-Packard (HPQ), Oracle (ORCL) and International Business Machines (IBM), which are ahead of Dell in assembling higher-margin service businesses.
Dell’s PE, at less than 10, could make the stock look cheap to some. Remember, there’s no dividend and no overall revenue growth to speak of, and Dell has to big against the above-named companies in acquiring software firms.
Dell is making progress but faces heavy competition and has a long way to go.
Filed under: Company Analysis