a flicker of light at the end of the very dark tunnel?
Dell Raises Guidance for Earnings, Revenue
By Caroline Humer
NEW YORK (Reuters) - Dell Computer Corp., the No. 2 personal computer maker, on Thursday said second quarter earnings and revenue will be modestly better than it expected due to market share gains.
Dell shares rose six percent in after hours trading following the company's announcement.
"I would say in this environment, people were not expecting it," said Merrill Lynch analyst Steven Fortuna. "Dell is a market-share-gaining machine."
Dell (NasdaqNM:DELL - News) said it now believes second-quarter revenue will reach $8.3 billion, up about 9 percent from last year, and produce earnings of 19 cents per share, an increase of 19 percent excluding a special charge a year-ago. The second quarter ends Aug. 2.
The company had said on May 16 that revenue and earnings for the period could be $8.2 billion and 18 cents per share, respectively.
Dell said on Thursday it believes it is gaining market share in the midst of weak overall demand. Dell sells personal computers and large computers for businesses.
The company said its strength in the current quarter is broadly based, with growth in the education, government and consumer businesses.
Dell said it expects operating profit as a percentage of revenue to be up sharply from the most recent and year-ago quarters.
Corporate spending on technology has been weak in 2002, leading some technology companies to issue earnings warnings for this quarter.
During the past two years as personal computer demand has waned, Dell has gained share by consistently lowering prices on PCs by taking orders directly from customers and keeping inventories low.
Robertson Stephens analyst Eric Rothdeutsch said he believes the current environment has been tough on competitors, such as Hewlett-Packard Co.(NYSE:HPQ - News), which has high PC inventories and doesn't benefit as quickly when the price of PC parts decline.
"Since (Dell) has only 3 to 5 days worth of inventories, with component costs declining again, they can pass along savings to customers faster than anybody else can," Rothdeutsch said.
Dell in 2001 beat out Compaq Computer Corp. as the No. 1 PC maker by waging an aggressive price war. It lost that spot in May when HP bought Compaq Computer Corp., vaulting HP to No. 1 PC maker.
Merrill's Fortuna said that Dell's strength in the quarter -- which comes after competitor Apple Computer Inc.(NasdaqNM:AAPL - News) has warned of weak results -- may give investors more confidence in the company's earnings during the second half of the year.
According to Thomson First Call, analysts see Dell posting earnings of 76 cents in fiscal 2003.
On Tuesday, Chief Operating Officer Kevin Rollins said during a conference call with investors that the company was on track to make its guidance given in May.
Rollins also threw cold water on speculation that the company is considering a large purchase of a printer company, including buying Lexmark International Inc. (NYSE:LXK - News).
Dell shares rose 6 percent to $25.40 in after-hours trading, up from a close of $23.93 in regular Nasdaq trade, when it gained 26 cents. |
