HOT OFF THE PRESS
No signs personal computer business slowing - Dell
Reuters Story - July 18, 1997 15:43
By Jeff Franks
AUSTIN, Texas, July 18 (Reuter) - Dell Computer Corp.
executives had a simple message Friday at the company's annual
shareholder meeting: let the good times roll.
They said there were no signs that the personal computer
industry was cooling off and therefore little danger of a
profit-trimming price war or a drop in demand.
The shareholders, who have seen their stock value rise
astronomically since 1988, approved a 2-for-1 stock split,
effective on July 25.
They cheered when founder and Chairman Michael Dell said
that $1,000 in Dell stock bought when the firm went public in
1988 was now worth $104,700. The stock has more than doubled
this year, rising as high as $151.31 on Friday before trading
up 50 cents at $149.25 on Nasdaq at mid-afternoon.
Dell said he agreed with analysts who say the PC industry
as a whole will grow 17 percent to 20 percent a year through
2000.
"It's a very bright outlook," Dell said.
He said Dell had become the world's third-largest PC
company in the first quarter, trailing Compaq and International
Business Machines Corp., and waved off any concerns that
Compaq's recent move into direct sales -- bypassing middlemen
-- would dent Dell's momentum.
Instead, he said, Dell, the king of direct sales, would use
its experience to fend off Compaq.
"We're the best direct company, they're the best indirect
(sales) company. It's kind of like the all-star baseball team
competing with the best basketball team, except now they all
want to play basketball," Dell told reporters.
"They've got a good team, but they're trained and
disciplined in indirect. It's not clear that all their
experience and training is going to translate into the direct
system," he said.
Dell said the company would use the Internet and various
services to maintain its competitive edge even as other firms
adopt its distribution model. He said the company was making
about $2 million a day in sales on the Internet, or double the
amount it had in the first quarter.
Overall, Dell earned $198 million on revenues of $2.59
billion in the first quarter. Dell would not comment on how the
second quarter had gone.
Some analysts have predicted that Compaq's move into direct
sales would touch off a price war and cut into the industry's
healthy profit margins. But Dell senior vice president Kevin
Rollins said there were no signs of war.
"We've not seen any extraordinary price moves by our
competitors. We believe most everyone has behaved very
rationally," he said.
Dell announced price cuts up to 16 percent on one of its
desktop lines on Thursday, but Michael Dell said the cuts were
part of the regular pricing adjustments in the industry.
"A price war is when the price has come down faster than
costs. That's not happening," he said.
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