Dell Computer Corp, the largest personal-computer maker, said fiscal fourth-quarter profit rose 5.1 percent as consumer sales got a lift from new advertising and as founder Michael Dell appeared on the QVC home shopping program.
Net income in the period ended Feb. 1 rose to US$456 million, or US$0.17 a share, from US$434 million, or US$0.16, a year earlier, the company said. Sales declined 7 percent to US$8.06 billion from US$8.67 billion.
Chairman and Chief Executive Michael Dell said corporate PC sales may revive in the second half of 2002, backing away from an earlier prediction that businesses would start spending again by the middle of the year. Consumer sales, which rose 56 percent in the US from the third quarter, are helping the PC maker compensate for the prolonged corporate slump, investors said.
"They are like the Wal-Marts of the PC industry," said Bob Rezaee, a fund manager at Montgomery Asset Management, referring to the biggest discount retailer. Montgomery owns 696,900 Dell shares and manages US$8 billion in assets. "They keep plowing away."
Dell's performance generated US$1 billion in cash from operations, easily topping rivals like Gateway Inc, Rezaee said.
Dell said revenue in the fiscal first quarter will be US$7.65 billion to US$7.82 billion and earnings will be US$0.16 a share. Analysts were expecting earnings of US$0.16 on sales of US$7.66 billion, the average estimates in a survey by Thomson Financial/First Call.
Michael Dell didn't repeat a previous prediction that sales would rebound in the middle of this year. During a press conference Thursday, he said he expects a "fairly gentle recovery" and it may be in the second half of this year.
■ Though No. 1 PC maker Dell Computer posted higher fourth-quarter results on Thursday, the markets weren't impressed. ''It was very telling that Dell announced a good quarter and the stock didn't go up,''said Bill Fleckenstein, head of Fleckenstein Capital, which has sold the company short. ``The market may have come to the same conclusions that I have.'' ■ Fleckenstein doubts there'll be a rebound in PC sales later this year, as CEO Michael Dell has predicted. Market researcher Dataquest Inc is predicting 4.6 percent growth for PC makers this year, with a decline in the first quarter and a pickup of 6.9 percent by the fourth quarter. ■ Dell is also planning to go after the markets for servers and data-storage systems, which have higher margins. In November, the company introduced a cheaper server with fewer features, targeting sales to smaller businesses. ■ That's won applause from some investors who want Dell to go after new opportunities outside of PCs. ''He's setting the bar high and I'd be concerned if he didn't set it high,'' said James Lyon, a portfolio manager at Oakwood Capital Management.
SOURCE: BLOOMBERG
"We're seeing stabilization to slight strengthening," Dell said. "The bottom was the third quarter of last year."
The forecast for lower revenue was expected after similar reports from Hewlett-Packard Co, said Vinnie Muscolino, a fund manager at David L. Babson, which manages US$70 billion in assets and has 450,000 Dell shares.
"I have trouble getting excited about the PC industry," Muscolino said. "I still wish something good would happen in that space."
Dell's gross profit margin was 18 percent, the same as in the third quarter and slightly down from the same period a year ago. The company's operating expenses were 10.2 percent of its revenue, which Dell said was the lowest ratio in its history.
Dell attributed its growth in PCs sold to US consumers to an ad campaign featuring a character named Steven, whose recurring line is, "Dude, you're getting a Dell!"
"What drove the upside this quarter was consumer," said Christian Koch, a technology analyst at Trusco Capital Management, which manages US$50 billion and sold its Dell shares last year. "You won't see earnings leverage in Dell's business model until you start to see improvement in corporate PCs."
Koch doesn't expect corporations to begin a large-scale replacement cycle until September so he expects to wait until the summer to begin buying Dell shares.
Unit shipments in Dell's enterprise division, where it sells servers and storage devices, was a smaller percentage of revenue, 18 percent, compared with 19 percent in the third quarter. Desktops accounted for 57 percent of revenue, compared to 52 percent in the third quarter.
Michael Dell said that was because consumer sales were so strong. Growth exceeded expectations in Germany, Japan and China, said Chief Financial Officer James Schneider.
RSS