Dell delivers again in Q1

Dell Computer Corp. easily hurdled Wall Street estimates in the first quarter and sees the same prospects it saw at the end of the fourth quarter.
Written by Larry Dignan, Contributor
Dell Computer Corp. easily hurdled Wall Street estimates in the first quarter and sees the same prospects it saw at the end of the fourth quarter.

-by Larry Dignan, ZDNN

12 May 2000 - After market close Thursday, Dell saw first quarter earnings of US$525 million, or 19 cents a share. Earnings tracking firm First Call Corp. projected earnings of 16 cents a share.

For the rest of the year, Dell maintains the same outlook it stated in February. At that time, the company said it saw revenue growth in the low 30 percent range in 2000. "Our revenue goals and expectations for the balance of the year remain unchanged," CFO James M. Schneider said, during a conference call with analysts.

Seasonal demand patterns appear to be following historical trends, said Schneider, adding that Dell's second quarter revenue typically rises 8 percent sequentially.

Dell expects its operating margins between 9 and 10 percent for the full year, and rising above 10 percent by the fourth quarter. However, component costs remain "volatile", Schneider said.

Wall Street should expect higher gains from investment sales in coming quarters, Schneider said.

Revenue for the first quarter was US$7.3 million, up 31 percent from a year ago and in line with analysts' projections. Dell reported earnings of US$434 million, or 16 cents a share, on sales of US$5.53 million in the first quarter, a year ago.

It was a solid quarter for Dell. In the fourth quarter, the PC maker issued a profit warning because of a Year 2000 sales slowdown.

Sales to the Americas accounted for 70 percent of revenue, with Europe representing 22 percent. Asia Pacific and Japan accounted for 8 percent of sales.

Worldwide sales up 32 percent
As for the revenue growth breakdown, Dell said worldwide product sales were up 32 percent from a year ago with sales from the Americas gaining 35 percent. Sales in Europe were up 17 percent and up 47 percent in Asia Pacific and Japan.

By product, desktops accounted for 52 percent of Dell's revenue with enterprise systems representing 18 percent. Notebooks accounted for 30 percent of sales.

The company said it was growing revenue beyond the PC. Services sales topped US$500 million for the first time, up 50 percent from a year ago. Sales of Dell's most profitable products -- servers, storage products, workstations and notebook PCs -- rose to 48 percent of total system sales, up from 39 percent a year ago.

Lower component costs also helped Dell boost the bottom line. The company generated more than US$760 million in cash in the first quarter, and used a portion of that sum to buy back 11 million shares. Dell had US$7 billion in cash at the end of the quarter.

In its earnings statement, Dell talked up its Internet infrastructure strategy, which will offer Web-based services to customers. Dell's Web hosting business has added 2,000 customers in two months, and the company has started shipping Internet appliance servers, the company said.
-- Sergio G. Non, ZDII, contributed to this report.

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