Dell: Earnings to Pass Expectations
Monday, January 21st 2002, 12:00 am
By: News On 6
AUSTIN (AP) _ Dell Computer Corp. said Friday that surprisingly strong consumer sales will lift fourth-quarter earnings past Wall Street forecasts.
Dell, the world's leading maker of personal computers, said sales to consumers in the quarter ending Feb. 1 will grow 50 percent over the previous three months.
That will push total sales, including those to business customers, to $8 billion, Dell said. Analysts had expected $7.6 billion in sales for the quarter.
The boost in sales will lead to quarterly earnings of 17 cents per share, Dell said. Analysts surveyed by Thomson Financial/First Call had forecast 16 cents per share.
But investors reacted to disappointing forecasts from IBM Corp. and Microsoft Corp. and sold technology stocks before the long holiday weekend.
Shares of Round Rock-based Dell fell 85 cents Friday to $28.10.
``There is a general malaise right now about the tech sector,'' said Marc Klee, portfolio manager of the John Hancock Technology Fund. ``Investors and companies were hoping to hear that the economy had improved.''
The PC industry is struggling _ several research firms Thursday said sales declined worldwide last year _ but Dell is confident that it can prosper by selling directly to customers instead of through retailers.
That allows Dell to hold down costs and increase PC sales despite the industry decline, analysts said.
``They're doing extremely well in a catastrophic downturn, so hats off to them,'' said Ashok Kumar, an analyst with US Bancorp Piper Jaffray.
Dell was the only one of the five major PC makers whose shipments increased last year, according to the researchers.
Research firm IDC reported that Dell's share of the global PC market rose from 11.7 percent to 14.2 percent.
Gartner Dataquest, which calculates PC share differently, said Dell increased shipments 18.3 percent to about 17 million worldwide and boosted its market share to 13.3 percent.
Compaq, HP and IBM, in that order, trailed Dell in worldwide market share, the researchers said.
Dell made its early fortune selling to large businesses, government and schools. Recently, it has increased its focus on consumers by beefing up television and print advertising. It has also spruced up its consumer product line, including adding the $599 SmartStep PC, which comes with one basic configuration instead of many.
But big customers are still important, and Dell benefited in the fourth quarter from strong sales to the government, which replaced many computers after the Sept. 11 terrorist attacks on the Pentagon and World Trade Centers, Klee said.
The direct model could hurt Dell in the upcoming first quarter as prices for computer parts rise and consumer sales drop off after the holidays, he said.
``Because Dell runs lean and mean, it hurts when component price goes up,'' Klee said. ``Dell has no surplus of the cheaper stuff. Usually that low inventory helps them, but this will be a rare time when it hurts them.''
Kumar and Klee both predicted a slow first quarter would be offset by an expected industrywide upturn in the second half of the year.
Dell is scheduled to release financial results Feb. 14.