Dell Computer Corp said fiscal first-quarter sales will exceed forecasts and profit will meet targets, as the world's biggest personal-computer maker wins business from rivals and reduces costs.
Dell shares rose as much as 3.1 percent on the news. Revenue in the period ending May 3 will be about US$7.9 billion, the company said in a statement. Dell in February said it would earn US$0.16 a share on sales of US$7.65 billion to US$7.82 billion.
Chairman Michael Dell has predicted that corporate PC sales will revive in the second half. Dell has responded to the slump by focusing on sales to home users. In a meeting with analysts in New York, Dell will outline plans to boost sales of more-profitable corporate computers such as servers and storage devices.
"This is very positive for Dell, but I would be cautious about extrapolating that to the rest of the industry," said James Lyon, a portfolio manager at Oakwood Capital Management, which owns 136,000 Dell shares and manages US$375 million in assets. "We're coming out of our recession, but technology will lag a little while longer."
Analysts polled by Thomson Financial/First Call on average expect earnings of US$0.16 a share on revenue of US$7.7 billion. In last year's first quarter, Dell had net income of US$462 million, or US$0.17 a share, on sales of US$8.03 billion.
Dell sells PCs directly to customers, building systems only after clients place an order on the phone or the Internet. The company said manufacturing and operating efficiencies allowed it to reduce prices in the recent period, which helped boost sales.
Some investors said they were concerned that rising prices for PC parts, such as dynamic random-access memory chips, might reduce Dell's earnings.
Component costs have "flattened somewhat," compared with last year when they dropped, Chief Operating Officer Kevin Rollins said in the company's statement. At the same time, Dell reduced costs, he said.
In an interview before the forecast, Rollins said Dell will reclaim its No. 1 position in the PC market about two quarters after Hewlett-Packard Co completes its pending acquisition of Compaq Computer.
Dell is capable of regaining the lead because Hewlett-Packard and Compaq will have to decide which brands of PCs they are going to keep, said Bob Rezaee, a fund manager at Montgomery Asset Management, which owns 600,000 Dell shares and manages US$8 billion in assets.
"There are customers who will be disillusioned no matter what the decision," said Rezaee. "That's disruptive to the H-P/Compaq combination."
Dell, which supplanted Compaq as the biggest PC maker last year, had about 14 percent of world PC shipments in the fourth quarter, according to research firm IDC. Compaq and Hewlett-Packard together would have had about 19 percent of the market.
Hewlett-Packard is seeking to complete the proposed US$18.9 billion acquisition of Compaq by May. Director Walter Hewlett, who solicited proxies against the acquisition, has filed a lawsuit to stop the deal while awaiting the official results of last month's shareholder vote.
RSS