Dell Computer Corp, the world's second-largest personal computer maker, increased its forecast for sales and profit this quarter on a rise in consumer and government demand. The company's shares jumped 7.5 percent.
"I'm trying to contain my glee -- it's great," said James Lyon, who helps invest US$340 million at Oakwood Capital Management, owner of 135,000 Dell shares. "Dell continues to execute the same way they've executed for the past two years. They continue to take market share from their competitors."
Earnings in the second quarter ending Aug. 2 will be US$0.19 a share on revenue of US$8.3 billion, compared with a May estimate of US$0.18 on sales of US$8.2 billion. In last year's second quarter, Dell had a net loss of US$0.04 on sales of US$7.6 billion.
Sales are rising on strong demand in the US from customers in the consumer, education and government markets, Dell said. The company has used appearances on the QVC home-shopping television network and advertisements aimed at students and home users to win business from rivals such as Hewlett-Packard Co and Gateway Inc, even as the PC market shrinks.
Dell shares climbed as high as US$25.72 after the company boosted its forecast. The stock gained US$0.26 to US$23.93 in regular US trading before the announcement and has declined 12 percent this year.
Computer-related shares in Asia also got a boost, with Taiwan's Quanta Computer Inc rising as much as 6.2 percent to NT$85.50 and Samsung Electronics Co gaining as much as 5.6 percent to 350,000 won. Quanta and Samsung both supply notebook computers to Dell.
Dell became the second-largest PC maker after Hewlett-Packard completed its acquisition of Compaq Computer Corp in May. Dell's announcement means it's been successful in lowering prices aggressively to win market share, said Andy Neff, an analyst for Bear Stearns & Co, who owns shares of Dell.
In the first quarter of this year, Dell was the only large PC maker to gain market share and increase unit shipments, according to researchers Dataquest Inc and IDC. Dell's shipments rose 16 percent in the period, even as PC unit sales industrywide dropped 2.7 percent, IDC said in April.
"Dell is very intent on pulling all the levers they can to regain the No. 1 spot," said Neff.
Dell has credited the jump in consumer sales in part to its TV advertising starring a youthful pitchman, Steven, who helps confused PC buyers with features and exclaims, "Dude, you're getting a Dell!" The company spent US$361 million on ads in its last fiscal year.
The PC maker's profit also is benefiting from lower prices for components such as dynamic random-access memory chips and flat-panel monitors, Neff said.
Dell said profit as a percentage of revenue will be up "sharply" from the previous quarter and from a year ago.
Investors have been waiting for signs of a rebound in PC sales to large companies, Dell's main customers. The company didn't say in today's release whether businesses have boosted spending, and officials weren't available for interviews, spokesman T.R. Reid said.
Businesses will increase buying by the fourth quarter to take advantage of a new tax law implemented earlier this year that allows for accelerated depreciation of investments, Lyon said.
"The rebound on the corporate side is coming," Lyon said. "In the fourth quarter a lot of companies holding back on capital spending will let some loose."
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