Q1 earnings: Dell delivers again

Direct-PC seller easily hurdles Wall Street estimates with earnings of 19 cents per share with revenue of $7.3bn, up 31 percent
Written by Larry Dignan, Contributor

Dell easily hurdled Wall Street estimates in the first quarter and sees the same prospects it saw at the end of the fourth quarter. After market close Thursday, Dell saw first quarter earnings of $525m, (£347m) or 19 cents a share. Earnings tracking firm First Call 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 $7.3bn, up 31 percent from a year ago and in line with analysts' projections. Dell reported earnings of $434m, or 16 cents a share, on sales of $5.53m 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.

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 $500m 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 $760m in cash in the first quarter, and used a portion of that sum to buy back 11m shares. Dell had $7bn 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, Inter@ctive Investor, contributed to this report

What do you think? Tell the Mailroom. And read what others have said.

See ZDII for US tech investor news.

See techTrader for more technology investment news, plus quotes and research.

Editorial standards