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Dell reports 24% increase in earnings

Personal computer bellwether Dell Inc reported a 24 percent increase in fourth quarter earnings Thursday, citing record product shipments during the quarter.

Dell said it earned US$749 million, or US$0.29 per share, compared with US$603 million, or US$0.23 a share the same quarter a year ago.

Analysts surveyed by Thomson First Call had expected earnings of US$0.28 a share.

"Much of the industry's quarterly growth was at the low ends of the desktop and notebook categories, which offer little if any profitability," said Kevin Rollins, president and chief operating officer. "Dell met its operating targets by pursuing profitable growth."

Revenue was US$11.5 billion, up from US$9.7 billion in the same quarter last year.

For the year, the company's earnings were US$2.6 billion, up from nearly US$2.1 billion in the last fiscal year.

Product shipments in Europe, the Middle East and Africa rose 33 percent, primarily in the UK, France and Germany.

Rollins and CEO Michael Dell said they expect first-quarter fiscal 2005 product shipments to rise more than 20 percent, ahead of anticipated industry growth.

Dell, the world's second-largest personal-computer maker, said revenue will rise 18 percent this quarter as business spending rebounds. Selling more profitable computers will help drive earnings higher.

Sales will probably be US$11.2 billion in the first quarter, Dell said late yesterday. Earnings per share will probably be US$0.28, the Round Rock, Texas-based comapny said. The forecasts matched the average estimate of analysts surveyed by Thomson Financial.

"We are seeing now more of a pickup in the corporate market than we had in the past," Dell Chief Financial Officer James Schneider said on a conference call.

Chairman Michael Dell cut costs and is pushing customers to buy more expensive computers, storage devices and servers to help reduce the impact of tumbling PC prices. The average price of a PC fell 33 percent last year, according to market research firm IDC. That helped drive fourth-quarter profit to a record US$749 million in the fourth quarter ended Jan. 30, Dell said.

"They will benefit from an upturn in corporate spending," said Chuck Jones, who help manage US$8 billion, including Dell shares, at Stein Roe Investment Counsel in San Francisco. "If for some reason, the corporate spending is flat, they can make their numbers but it will be a whole lot easier if corporate spending grows by 4 percent or 5 percent."

The company's sales growth was twice that of Hewlett-Packard Co.'s 9.1 percent. Hewlett-Packard said this week it will report sales of US$19.5 billion for the quarter when it releases results next Thursday. Dell has a bigger base of corporate customers than Hewlett-Packard, Stein Roe's Jones said.

Corporate customers, the biggest segment for Dell, are increasing spending, Michael Dell, 38, said on a conference call with reporters yesterday.

"Business is growing, the signs are getting relatively healthy," Dell said. "We're seeing a lot of demand from customers to refresh their older installed products."
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