Dell rises after earnings target boost
By Mike Tarsala, CBS.MarketWatch.com
Last Update: 4:36 PM ET July 12, 2002
AUSTIN, Texas (CBS.MW) -- Dell Computer shares rose as much as 7 percent Friday after the company cited market share gains for boosting its second-quarter sales and profit targets.
Free! Sign up here to receive the Mutual Funds e-newsletter!
INFORMATION FOR DELL:
Create an alert for DELL
Add DELL to my portfolio
Get more cool charts on DELL
Discuss DELL
NEWS FOR DELL
Techs, Nasdaq run out of steam
Dow buckles, Nasdaq ends little changed
Toronto makes it five losers in a row
More news for DELL
Shares of Dell (DELL: news, chart, profile) rose $1.10, or 4.3 percent, to $25.03 by the end of the day. The first hour of trading saw heavy volume of more than 12 million shares; by the end of the day 36.5 million shares had changed hands. The price rose as high as $25.65.
Dell, the No. 2 computer manufacturer worldwide behind Hewlett-Packard (HPQ: news, chart, profile), now expects earnings of 19 cents a share on sales of $8.3 billion. Analysts had projected the company to earn 18 cents a share on revenue of about $8.2 billion, according to Thomson Financial/First Call.
Analysts from Merrill Lynch and several fund managers on Friday were quick to signal that better-than-expected Dell earnings don't signal increased demand for the computer industry overall.
"Senior people from Dell just said yesterday that they don't see any immediate pickup in the PC market, so the fact that Dell can raise earnings and sales is a tribute to the company's operational expertise and their competitive capabilities -- not a tribute to the market as a whole," said Michael Boyle, chairman of the Boyle Marathon Fund (BFUNX: news, chart, profile).
In April, management at Dell projected that personal-computer shipments industrywide would fall 5 percent, while Dell's would rise 3 percent. The company seems to have met its goal, said Dan Niles, analyst with Lehman Bros.
"This will be the second quarter that Dell beat expectations by a penny on the bottom line," Niles said. "They're continuing to do what they do well."
The computer company stands out as one of the only high-profile tech manufacturers to guide second-quarter financial targets higher. Fellow computer-maker Apple Computer (AAPL: news, chart, profile), chipmakers Intel (INTC: news, chart, profile) and Advanced Micro Devices (AMD: news, chart, profile), and software-maker SAP (SAP: news, chart, profile) are among the leading tech concerns that have issued recent sales or earnings warnings.
Strength in Dell's business is "broadly based, highlighted by growth in the U.S. education, government and consumer business segments," the company said in a statement. Management added that it expects the company's operating profit as a percent of revenue to be up sharply from the most recent and year-ago quarters.
"For other industry players, a Dell with a higher margin means more pressure ahead," Bear Stearns analysts wrote to clients. The brokerage added that upcoming industry market-share statistics will show overall gains for Dell vs. Hewlett-Packard, Apple and Gateway (GTW: news, chart, profile).
"Clearly, they have the model to continue to take market share," added Chris Bonavico, manager of the TransAmerica Premier Aggressive Growth Fund (TPAGX: news, chart, profile). "They are performing extraordinarily well in a difficult market."
Dell's second quarter ends Aug. 2. The company plans to announce its second-quarter results and third-quarter sales and earnings targets on Aug. 15.
marketwatch.com |
