Dell's (DELL) Software Initiative Could Grow Profits 50%+
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Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 2.4%
EPS Growth %: -3.8%
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Shares of Dell (Nasdaq: DELL) are trudging higher Friday amid sloppy market conditions, as AllThingsD cites Reuters in reporting at least one exec at the PC giant is getting bullish on another market for Dell: software.
John Swainson, Software Group president at Dell, is aiming for $5 billion in annual software sales. Comments were made at a roundtable discussion in San Francisco, CA, earlier. That's up from $1.2 billion in software revenue reported last year.
Recently, Dell made the $2.4 billion acquisition of Quest Software, a stepping stone for the company into the lucrative, higher-margin software segment. Quest might be able to add an additional $1 billion in top line growth for software.
So, with about 30 percent margins, Swainson estimates that $5 billion in software sales would contribute $1.5 billion in net income. For some prospective, Dell's sales in 2011 were $62.07 billion. When all was said an done, the bottom-line number was $3.49 billion, or 5.6 percent of sales. Thus, ceteris paribus, Swainson's goal might lead to a 50 percent increase in earnings for Dell over the next few years.
That's pretty noteworthy.
Dell recently highlighted formation of the Software Group into its annual shareholders meeting, saying the segment will "add to Dell’s enterprise solutions capability, accelerate strategic growth and further differentiate the company from competitors with standards-based, scalable and flexible Dell-owned intellectual property."
Shares are down modestly Friday, off of session lows heading into mid-session trading.
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John Swainson, Software Group president at Dell, is aiming for $5 billion in annual software sales. Comments were made at a roundtable discussion in San Francisco, CA, earlier. That's up from $1.2 billion in software revenue reported last year.
Recently, Dell made the $2.4 billion acquisition of Quest Software, a stepping stone for the company into the lucrative, higher-margin software segment. Quest might be able to add an additional $1 billion in top line growth for software.
So, with about 30 percent margins, Swainson estimates that $5 billion in software sales would contribute $1.5 billion in net income. For some prospective, Dell's sales in 2011 were $62.07 billion. When all was said an done, the bottom-line number was $3.49 billion, or 5.6 percent of sales. Thus, ceteris paribus, Swainson's goal might lead to a 50 percent increase in earnings for Dell over the next few years.
That's pretty noteworthy.
Dell recently highlighted formation of the Software Group into its annual shareholders meeting, saying the segment will "add to Dell’s enterprise solutions capability, accelerate strategic growth and further differentiate the company from competitors with standards-based, scalable and flexible Dell-owned intellectual property."
Shares are down modestly Friday, off of session lows heading into mid-session trading.
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