Dell Revenue, Profit Jump In Quarter
Dell Revenue, Profit Jump In Quarter
14/11/2003 12:32
Dell Inc. earnings shot up 21 percent in its third quarter. A senior company executive, saying the computer industry has "stabilized," yesterday predicted a similarly strong fourth quarter.

Though sales normally pick up for computer makers as the calendar year comes to a close, Chief Financial Officer James M. Schneider called the quarter's results "unseasonably high." Sales in all of Dell's business lines grew in the double-digits. Schneider said in a conference call with reporters and analysts last night that the tech sector has now seen five consecutive quarters of growth and that "things have definitely stabilized" in the industry.

Analysts agreed yesterday that it appears the tech industry may finally be emerging from its long slump.

"Unit sales growth seems clearly established, not just for Dell but across the industry," said Roger L. Kay, an analyst at the research firm IDC. "That just confirms the idea that we're in some sort of recovery period for the industry."

Schneider credited sales in Dell's business products, primarily servers and external data-storage systems, for its strong performance.

Dell's revenue from storage systems -- used by corporate customers to manage back-end operations -- grew 68 percent, and global shipments of servers climbed 30 percent. Schneider said his company still has plenty of room to grow in this arena because it has only 5 percent of the $800 billion market.

Dell President Kevin B. Rollins has said he wants Dell to grow into a $60 billion company within three years. This year, the company is on track to bring in a little more than $40 billion.

One analyst judged the figure as a realistic goal. "They're pretty difficult to stop right now; they're not taking any pain from their competitors," said Martin Reynolds, an analyst at research firm Gartner Inc. "As long as their competition doesn't figure out what to do to slow Dell down, they can make it."

To make such growth happen, Dell has expanded many of its businesses, even ramping up the support services the computer maker provides for its customers. Although Dell has not historically been a major player in this space, the company is starting to be taken a little more seriously in this arena as well; services revenue rose 31 percent in its fiscal third quarter.

Dell earned $677 million (26 cents per share) in the three months ended Oct. 31, compared with net income of $561 million (21 cents) in the same period of 2002. Quarterly revenue rose 16 percent, to $10.62 billion. In the first three quarters of this fiscal year, Dell's revenue climbed 17 percent and its net income is up 25 percent.

Dell's performance stands in contrast to other large computer manufacturers. Last month Gateway Inc. reported a 20 percent drop in third-quarter revenue. Hewlett-Packard Co. is scheduled to announce earnings from its most recent quarter on Nov. 19.

Dell is expanding its line of consumer electronics. The company announced in September that it would launch an online music store by year's end, along with new products such as a digital music player and a liquid-crystal-display television.

Even Dell's new line of printers is starting to bring in profits, the Round Rock, Tex.-based company said yesterday. Shipments of printers were up about 70 percent in the third quarter over the second quarter, and Dell predicted an increase of 80 percent in the fourth quarter. Dell said it has sold a million printers since launching the line in March.

Dell's consumer business makes up only about 15 percent of its revenue today, a figure that Dell founder Michael S. Dell has said he does not expect to change radically over the next few years. "These new products are interesting, but most of our growth is still coming from the enterprise," he said yesterday, referring to businesses' growing computing and data-storage needs.

The company gave investors high expectations for the next fiscal quarter; Schneider forecast unit sales growth of 25 percent compared with the fourth quarter of 2002 and projected revenue of $11.5 billion.

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