Q3 2013 Earnings Call Transcript

Transcript Call Date 11/15/2012

Operator: Good afternoon and welcome to the Dell Inc. Third Quarter Fiscal Year 2013 Earnings Conference Call. I'd like to inform all participants this call is being recorded at the request of Dell. This broadcast is the copyrighted property of Dell Inc. Any rebroadcast of this information in whole or part without the prior written permission of Dell Inc. is prohibited. As a reminder, Dell is also simulcasting this presentation with slides at Later, we will conduct a question-and-answer session.

I'd like to turn the call over to Rob Williams, Head of Investor Relations. Mr. Williams, you may begin.

Robert Williams - IR: Thanks, Regina. With me today are Michael Dell, Brian Gladden and Steve Felice. The web deck and our DellShares vLog with Brian and Steve featuring more insights on the quarter are posted to our website in advance to the call. I encourage you to review these materials for additional prospective.

Next, I'd also like to remind you that all statements made during this call that relate to future results and events are forward-looking statements that are based on our current expectations. Additional results and events could differ materially from those projected in the forward-looking statements because of a number of risks and uncertainties which are discussed in our annual and quarterly SEC filings and in the cautionary statements in our press release and web deck. We assume no obligation to update our forward-looking statements.

Please also note that we will be referring to non-GAAP financial measures, including non-GAAP gross margin, operating expenses, operating income, net income and earnings per share. Historical non-GAAP measures are reconciled to the most directly comparable GAAP measures in the web deck posted in the Investor Relations section of and in our press release, and 8-K filed today. I encourage you to review these documents. Please also note that unless otherwise mentioned, all growth percentages refer to our year-over-year. Now I'd like to turn it over to Brian.

Brian T. Gladden - SVP and CFO: Thanks, Rob. Four years ago this month we embarked on our strategy to deliver end-to-end solutions to our customers with a scalable design point. Since then we've made great strides in executing this strategy and continue to add to our capabilities.

In the third quarter, our enterprise solutions and services business revenue was $4.8 billion, up 3% led by 11% growth in our server and networking business. These businesses which were about $14 billion in FY'08 are now at an annual run rate approaching $20 billion.

Year-to-date, they are on 4% and have generated more than 50% of our non-GAAP gross margin over that period of time. Year-to-date we've added AppAssure, SonicWALL, Wyse, Make, Clerity and Quest bringing enhanced capabilities to a portfolio of software and services that address many of our customers most pressing needs including security, cloud, data backup and protection, systems management and application monetization.

Specifically the addition of Quest software during the quarter provides us with a foundational asset for a software business, which will contribute to a higher mix of solutions with more predictable revenue and margin streams.

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