Dell Smashed After Hours
Reviewing the numbers, it's difficult to understand what the market wants out of companies today. DELL only has a forward PE of 8 so the expectations should be significantly lower than what the market apparently wants.
DELL reported record cash flow of $2.4B for the quarter and $5.2B over the last four quarters. With an enterprise value around $22B, it only trades at 4x operating cash flow. Wow!
The company has a record cash balance of $16.2B even after buying back $1.1B in stock during the quarter. Though DELL does have over $7B in debt.
DELL remains very attractive on a valuation basis, but it appears to be a value trap where the multiple will never match the cash flow. Too many investors want revenue growth or nothing at all. The market remains incredibly binary.
- Revenue in the quarter was $15.7 billion, up 1 percent over last year and 4 percent sequentially.
- GAAP earnings per share was 48 cents, up 71 percent; non-GAAP EPS was 54 cents, up 69 percent. Vendor settlements resulted in approximately $70 million in benefit in the quarter that increased non-GAAP gross margins 50 basis points and non-GAAP earnings per share by 4 cents.
- GAAP operating income was $1.1 billion, or 7.3 percent of revenue. Non-GAAP operating income was $1.3 billion, or 8.5 percent of revenue.
- Cash flow from operations was $2.4 billion for the quarter and $5.2 billion over the last four quarters. Dell ended the quarter with a record high $16.2 billion in cash and investments and repurchased $1.1 billion in stock in the quarter.
Dell is focused on delivering IT solutions that provide both efficiency and flexibility, as the company aligns its business with large and faster growing markets, and creates a broader base of recurring revenue streams with higher profit potential. Based on consistent execution in the first half of the fiscal year, the continued management of lower-margin business and a positive mix shift to Dell intellectual property and higher-valued products, Dell is raising its non-GAAP operating income growth expectation for FY 2012 to 17-23 percent year-over-year from 12-18 percent. Based on strategic decisions to redirect resources from lower- to higher-value solutions and a more uncertain demand environment, the company also is revising its full-year revenue-growth outlook to 1-5 percent from the previous range of 5-9 percent. In the third quarter, Dell expects to see revenue roughly flat relative to Q2, which is in line with seasonality over the past two years.
Disclosure: No position in DELL. Please review the disclaimer page.