US Report: Dell profits soar

Dell on Tuesday beat Wall Street expectations in its first quarter, returning a profit of $305m (£186m), or 44 cents a share, on sales of $3.92bn (£2.
Written by ZDNet UK, Contributor

Dell on Tuesday beat Wall Street expectations in its first quarter, returning a profit of $305m (£186m), or 44 cents a share, on sales of $3.92bn (£2.4bn). Analysts at First Call in the US expected the PC manufacturer to post a profit of 42 cents a share in the quarter.

Dell shares closed up 3/32 to 94 19/32 ahead of the earnings report.

From an investing standpoint, Dell can do no wrong. The company consistently beats analysts' expectations and the stock continues to grow at a surreal pace. Shares were trading at 70 in mid-April before going on this latest assault.

In the quarter, sales improved 52 percent versus the year-ago quarter when it returned a profit of $198m (£120m), or 27 cents a share, on sales of $2.6bn (£1.58m). Sales into Asia, despite the general slowdown within the industry, grew by 35 percent while European sales improved 62 percent. Profit margins grew from 22 percent in the year-ago quarter to 22.3 percent in what was supposed to be a bad quarter.

Dell's notebook computer sales shot up 80 percent from the year-ago period and desktop sales grew 40 percent.

"There's nothing to slow this company down," said Megan Graham-Hackett, an analyst at S&P Equity Group in the US. "They just keep finding new ways to dominate the competition. It's very impressive."

Key to the phenomenal growth in worldwide sales is Dell's direct distribution system. At worst, Dell will have only seven days worth of inventory waiting to be shipped. "Our consistently strong performance demonstrates that buying direct from Dell provides customers with a better overall experience in reliability, service, value and convenience," said chief executive Michael Dell in a prepared release.

Dell also said the first-quarter results rank Dell first in worldwide profits, second in worldwide revenue and third in worldwide units among personal computer systems companies, based on their latest reported financial results and estimates of industry analysts.

In the quarter, inventory turned 46 times, on an annualised basis. In absolute dollar terms, Dell has maintained approximately the same level of inventory over the past two years, even as its revenues grew by more than $7bn (£4.26bn) over the same period.

In the Americas, revenue in the first quarter rose 50 percent to $2.6 (£1.6bn), led by gains in sales to consumers and to corporations. Sales from Europe grew 62 percent to more than $1.0bn (£0.60bn).

In the Asia-Pacific region including Japan, Dell revenue increased 35 percent to $269m (£164m) while profits expanded.

First Call consensus expects Dell to return a profit of $2.44 per share in fiscal 1999. Nineteen of the 31 institutional brokerage firms following the stock maintain either a buy or strong buy recommendation.

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