In an effort to overcome investor hostility Dell is going to do something it’s never done before – despite the fact it had no R&D to speak of – and that’s pay a quarterly dividend beginning in its third quarter which ends in November.
It’ll pay 32 cents a year, a return of roughly 2.7% based on the stock’s closing price of $11.86 on Monday. The expense will cost the company about $560 million a year.
Dell figures it’s got the cash flow, which has generated $4.9 billion in the last four quarters, to buy back stock and pay the dividend despite its nasty earnings and revenue slip last quarter.
While still the world’s third-largest PC supplier, Dell claims it’s “changed the conversation we’re having with our customers. We are a solutions company first, vertically focused, and creating more value for customers with innovative offerings that provide competitive advantage.”
At the end of April Dell had $17.2 billion in the bank and wants to keep making acquisitions to get out of its PC hole. It made eight acquisitions in the last 12 months, doubled the number of engineers developing enterprise solutions and more than tripled the number of specialists selling solutions over the past five years.
The result has been a shift in Dell’s sales to higher-margin data center solutions consisting of servers, networking, storage and related software and services. It says it’s getting 50% of its gross margin and more than 30% percent of its revenue from enterprise solutions and services. It projects they will grow at compound rate of 10% a year through fiscal 2016 and represent an increasing percentage of its operating income margin.
It made the announcement at its annual analysts meeting.