Here is an LT kinda spin on Dell 3Q, wonder if he is an advisor for Bloomberg!!!
bloomberg.com
Dell 3rd-Quarter Profit Falls Because of Acquisition Costs; Revenue Gains
By Loren Steffy
Dell's 3rd-Qtr Net Falls Because of Acquisition Costs (Update4)
(Adds comment from Michael Dell in 7th paragraph.)
Round Rock, Texas, Nov. 11 (Bloomberg) -- Dell Computer
Corp., the world's biggest direct seller of personal computers,
said fiscal third-quarter net income fell 17 percent because of
costs from an acquisition. Revenue rose 41 percent.
Net income in the quarter ended Oct. 29 dropped to $289
million, or 11 cents a share, from $348 million, or 14 cents, in
the year-earlier period. Dell said it would have earned $483
million, or 18 cents, without costs from its purchase of
ConvergeNet Technologies Inc., matching analysts' forecasts.
Dell warned investors last month that rising memory-chip
prices and a shortage of parts caused by a September earthquake
in Taiwan would reduce profit. Investors focused on whether those
issues, falling prices for PCs and slower corporate sales because
of Year 2000 concerns would cut Dell's revenue as well.
``They have alleviated any of the concerns about a
slowdown,' said Steven Salopek, an analyst with Banc One
Investment Advisors, which owns almost 11 million Dell shares.
``It was very reassuring.'
Dell shares rose 2, or 4.8 percent, to 43 7/16 before the
report. They climbed as high as 44 15/16 on regional exchanges
and electronic networks after the release.
Internet Sales
Revenue rose to $6.78 billion from $4.82 billion, in line
with analyst forecasts. The company said it's selling $35 million
worth of computers a day on the Internet, or 43 percent of its
sales.
On a conference call with analysts, Chairman Michael Dell
said his company is considering a partner for its Internet
service, known as DellNet.
When asked whether he was talking to potential partners
about an arrangement similar to one announced today between
Microsoft Corp. and Tandy Corp., Dell responded, ``That's a fair
assumption.' He didn't elaborate.
Microsoft said it will invest $100 million in Tandy's
radioshack.com online store and will sell its MSN Internet
service through Tandy's Radio Shack electronics retail chain.
Dell has been the best-performing stock in the Standard &
Poor's 500 Index this decade, with its shares rising more than
75,000 percent during that time. This year, though, they've
gained about 19 percent, their worst performance since 1993.
``It's certainly not been a disastrous year,' said Tim
Ghriskey, a portfolio manager for Dreyfus Corp., which owns about
3.8 million Dell shares. ``But when you look at some of the dot-
coms and other technology issues, it's underperforming them.'
Memory, Y2K OK
Costs for memory chips more than doubled in the quarter,
with a 25 percent increase in the last few weeks of October, Dell
Chief Financial Officer Tom Meredith said in an interview.
Because Dell sells directly to customers and keeps little
inventory in its factories, parts shortages affect it more than
PC makers such as Compaq Computer Corp. that sell to retailers
and distributors, said Ashok Kumar, an analyst with US Bancorp
Piper Jaffray.
At the same time, that may help the company now that memory
chip prices are falling again, he said.
``When components are in short supply, they feel the
pinch,' said Kumar, who rates Dell a ``buy.' ``The same thing
works in their favor when prices turn around.'
Dell has negotiated with component makers to ensure it gets
the supplies it needs. ``We are well-positioned with our
suppliers,' Meredith said.
Dell also struggled with a shortage of flat-panel screens
during the quarter, although that problem eased after the company
invested $200 million in Samsung Electronics Co. in return for a
stable supply of the screens.
``We're seeing a significant improvement in the availability
of flat-panel screens,' Michael Dell said on the conference
call.
The company is seeing little evidence of corporate customers
slowing PC purchases because of Year 2000 concerns, Meredith
said. ``Demand continues to be robust,' he said.
Demand Rises, Prices Fall
Sales of larger computers such as servers, workstations and
data-storage equipment surged 72 percent in the quarter. Dell's
push to boost sales to consumers paid off, with sales in that
area rising 62 percent. Notebook sales climbed 55 percent.
The average price for Dell's desktop and laptop computers
fell to about $2,100 from $2,400 during the period. Prices have
been falling as Dell gets into the more-competitive market for
consumer machines.
The third-quarter results include costs of 7 cents a share
for in-process research and development from the Oct. 27 purchase
of ConvergeNet.
Analysts polled by First Call Corp. expected a profit of 18
cents without the costs. Some estimates published on the Internet
were as high as 21 cents. |
