10 Things You Need To Know About Dell's Latest Financials

10 Things You Need To Know About Dell's Latest Financials

Going private in October 2013 took Dell off the quarterly earnings treadmill, but the Round Rock, Texas, company is required to make certain financial information public as part of its bid to acquire data storage giant EMC Corp.

In a U.S. Securities and Exchange Commission filing this week, Dell published financial results for its fiscal year ended Jan. 29, and the numbers show the company both contending with the challenges of a swiftly changing industry and making investments to try to get ahead of those changes.

The company lost $1.1 billion during the year, a narrower loss than the $1.2 billion loss it saw the year before.

Click through to see 10 key facts about Dell's financial condition.

Revenue Breakdown

In the fiscal year ended Jan. 29, Dell brought in $54.9 billion in revenue, a 6 percent decline from the $58.1 billion in brought in during the previous year. The revenue line is also a good illustration of the changes taking place in the industry. Dell's revenue for the most recent fiscal year was made up of 78.9 percent product revenue and 21.1 percent services and software. Product revenue was down 7 percent year over year while services and software revenue was up 1 percent.

The Rise Of Services Margins

As well as playing a growing role in Dell's revenue line, the company's services and software business is demonstrating that it can provide healthy margins. In the most recent fiscal year, services and software margins were $4.4 billion, a 13 percent increase from the previous year. Product margins, meanwhile, were $5.4 billion and fell 14 percent year over year.

Enterprise Solutions Group

Dell breaks its Enterprise Solutions Group into two components: servers and networking, and storage. The numbers say the past year was another tough one for storage, which finished with $2.2 billion in revenue, down more than 4 percent from the $2.3 it registered in the year ended Jan. 30, 2015. This was the second consecutive year of around 5 percent revenue declines for Dell's storage business. Servers and networking, on the other hand, grew 3 percent, to $12.8 billion in revenue. Overall, the group's revenue grew 2 percent year over year to nearly $15 billion.

Client Solutions

The market for PCs has been tough in recent quarters, and Dell felt that pressure during the last fiscal year. Revenue in its client solutions business -- Dell's term for PCs -- decreased 9 percent year over year to $35.9 billion. The company saw decreases in sales of PCs for commercial users and consumers, and noted that low demand and competitive pricing pressure were driving the declines.

Soft Software Sales

Dell's software group finished the year with about $1.4 billion in revenue, a 9 percent drop from the previous year. The company blamed the decline on "a decrease in systems management software sales, primarily due to disruption from a realignment of our sales organization," noting that software group revenue decreased "across all regions" during the year.

Dell Services

Dell Services revenue fell 5 percent year over year to $2.8 billion. At the source of the decrease was revenue runoff from several large contracts that outpaced Dell's ability to begin realizing revenue from newly signed contracts, the company said. Dell breaks its services business into two sections: infrastructure and cloud services, and applications and business process services. The groups saw revenue fall 3 percent and 7 percent, respectively.

Putting Aside Profits

Well, there weren't any (profits, that is). Dell said the $1.1 billion loss was the result of "amortization of intangible assets, purchase accounting adjustments, costs related to the going-private transaction, and other corporate expenses." Those costs reached $3.6 billion in the most recent fiscal year, and $3 billion the year before, Dell said. Excluding them would result in net income of $1.4 billion -- still a 14 percent drop from the previous year.

Watching Expenses While Boosting R&D Spending

One Dell partner who spoke to CRN recently said he wasn't worried about Dell's lack of profitability. As a private company, Dell can make calculated decisions to forgo profitability in order to invest in the business, and there's at least some sign of that in this week's filing. The company trimmed operating expenses 4 percent, to $10.2 billion. Within that, though, Dell boosted research, development and engineering spending 9 percent, to $1.3 billion, while decreasing selling, general and administrative expenses 6 percent, to $8.9 billion.

Outstanding Debt

Dell has said it will be aggressive about paying down the debt it takes on as part of the EMC acquisition, especially in the first 18 months after the transaction. The company is going to need as much as $49.5 billion in debt to make the deal work, and it's got a long roster of banks putting together the financing plans. In the most recent fiscal year, Dell repaid $1.1 billion in debt and is now carrying about $13.8 billion in debt.

Termination Fees

Dell and EMC executives have said they're confident the merger will be completed within the time frame the companies set out -- sometime between May and October -- despite the complexity of the deal and headwinds in the debt markets. EMC shareholders are expected to vote on the proposal sometime this spring, and the deal has already won anti-trust approval from both the U.S. and the European Union. Both companies have also said they're not too keen on paying termination fees in the event the deal doesn't go through. If that were to happen, EMC would be required to pay $2.5 billion to Dell. Dell would have to pay $4.5 billion to EMC.