DELL EARNINGS RISE 63 PERCENT ON 52-PERCENT SALES GAIN
Results Rank Company No. 1 in Profits, No. 2 in Revenue
and No. 3 in Units Worldwide
ROUND ROCK , Texas, May 19, 1998 -- Dell Computer Corporation (NASDAQ: Dell) today reported its 17th consecutive quarter of record revenue growth; for the third consecutive year, Dell has achieved year-over-year revenue growth of more than 40 percent in each quarter. Revenue increased 52 percent to more than $3.9 billion in the first fiscal quarter ended May 3, 1998. Earnings per share rose 63 percent to $.44, compared with $.27 in the year-ago quarter.
(in millions, except per-share data)
Q1 FY'99 Q1 FY'98
Net Revenues $3,920 $2,588
Operating Income $429 $277
Net Income $305 $198
Diluted Earnings Per Share $0.44 $0.27
"Our consistently strong performance demonstrates that buying direct from Dell provides customers with a better overall experience in reliability, service, value and convenience," said Michael S. Dell, chairman and chief executive officer.
He noted that the company believes these results rank Dell first in worldwide profits, second in worldwide revenue and third in worldwide units among personal computer systems companies, based on their latest reported financial results and estimates of industry analysts.
Operating income as a percentage of revenue increased to 10.9 percent from 10.7 percent in the year-ago quarter, as the company continued to prudently manage gross margins and operating expenses together, and to drive toward a more robust product mix.
Disciplined Asset Management Fuels Record ROIC
Dell again set the pace for the industry in asset management, generating $457 million in cash from operations and ending the first fiscal quarter with $2.4 billion in cash and marketable securities.
Inventory turned 46 times, on an annualized basis. In absolute dollar terms, Dell has maintained approximately the same level of inventory over the past two years, even as its revenues grew by more than $7 billion over the same period.
Return on invested capital (ROIC)-a fundamental measure of asset efficiency-was a record 229 percent in the quarter, which was more than four times the rate of the nearest major competitor.
Growth in Every Region Exceeds Market
Revenue growth was strong across the board, outpacing market growth by three to six times in every geographic region where Dell has operations.
In the Americas, revenue in the first quarter rose 50 percent to $2.6 billion, led by gains in sales to consumers and to corporations. Revenue from consumer sales was exceptionally strong, as Dell's programs to focus on the needs of savvy home computer users continued to expand.
Revenue from Europe grew 62 percent to more than $1.0 billion. Dell surpassed Hewlett Packard (H-P) to become the third-ranked computer systems company in Europe, according to industry analysts' reports.
In the Asia-Pacific region including Japan, Dell revenue increased 35 percent to $269 million while profits expanded. This is in sharp contrast to the overall computer market in the region, which declined 7 percent.
Enterprise and Notebook Products Gain Increasing Share
Driven by continued recognition in the technical press for their robust technology, reliability and value, Dell's enterprise-level products achieved triple-digit annual revenue growth for the sixth consecutive quarter. Revenue from the PowerEdge network server and Dell Precision workstation product lines was up 177 percent from the same quarter a year ago. According to industry analysts, Dell surpassed IBM and H-P in the United States, capturing the number-two ranking for both network servers and Microsoft Windows NT-based workstations in the first calendar quarter. Worldwide, Dell ranked number four for servers and number two for NT workstations. The company also achieved leader status as a top-tier US supplier of network servers based on both "its ability to execute" and "completeness of vision, " according to the Gartner Group's Windows NT: Strategies for Success report, which evaluated the top server vendors.
Revenue from Dell's Latitude and Inspiron notebook lines also was extremely strong, increasing 87 percent over the prior-year period. These results placed Dell ahead of IBM as the third-ranked notebook supplier in the U.S. and the fifth-ranked worldwide.
Sales of desktop computer systems continued to be strong, with revenue increasing 40 percent in the quarter. As the company exited the quarter, virtually100 percent of Dell Dimension desktops were based on Intel's Pentium II microprocesser-as were more than 70 percent of its OptiPlex corporate desktop line.
Investments in Direct Spur Speed and Customer Satisfaction
Dell's ongoing focus on investing in its core direct strategy to enhance efficiencies and increase service to its customers resulted in very strong momentum via www.dell.com. Global sales generated by the Internet currently exceed $5 million per day, which represents a $2 billion annualized run rate.
The company's e-service programs continued to expand as well as its e-commerce: approximately 3,000 Premier Pages provide personalized interaction and service capabilities for customers in all geographies and all lines of business. The Internet-based programs are the latest extension of Dell's unique direct approach, which earned several top quality and satisfaction awards during the quarter, among them: Top Hardware Vendor by Workgroup Technologies; Top Ranking for Quality and Customer Satisfaction in the Q1 Corporate IT study by Technology Business Research; Texas Quality Award for quality, customer satisfaction and performance excellence in the company's new OptiPlex manufacturing facility. Dell has won six other awards for superior service and customer satisfaction over the past 24 months.
"We partner with best-in-class suppliers, service partners and above all-our customers-to continually refine and expand our products and services," Mr. Dell said. "As long as we perform well, we believe that this approach provides our customers with more choice, more flexibility, and one source of accountability."
Ranked No. 125 in the Fortune 500r companies, Dell Computer Corporation is the world's leading direct computer systems company, based on revenues of $13.6 billion for the past four quarters. Dell designs and customizes products and services to end-user requirements, and offers an extensive selection of peripherals and software through the DellWarer program. Information on Dell and its products can be obtained through its toll-free number 1-800-388-8542 or by accessing the Dell World Wide Web server at www.dell.com.
# # #
Dell PowerEdge, OptiPlex, Dell Dimenson and Latitude are registered trademarks; Inspiron and Dell Precision are trademarks; and DellWare is a registered service mark of Dell Computer Corporation.
Fortune 500 is a registered trademark of Time Inc.
Dell disclaims any proprietary interest in the marks and names of others.
Special note: Statements in this press release that relate to future results and events are based on the company's current expectations. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, including the level of demand for personal computers; the intensity of competition; currency fluctuations; the cost of certain key components; and the company's ability to effectively manage product transitions and component availability, to minimize excess and obsolete inventory and to continue to expand and improve its infrastructure (including personnel and systems). Additional discussion of these and other factors affecting the company's business and prospects is contained in the company's periodic filings with the Securities and Exchange Commission.
DELL COMPUTER CORPORATION
Condensed Consolidated Statement of Income and Related Financial Highlights
(in millions, except per share data)
(unaudited)
ÿ Three Months Ended % Growth Rates
ÿ May 3,
1998 February 1,
1998 May 4,
1997 Sequential Yr. to Yr.
Net revenue $ 3,920 $ 3,737 $ 2,588 5% 52%
Cost of sales ÿ 3,047 ÿ 2,915 ÿ 2,030 5% 50%
ÿ ÿ Gross margin ÿ 873 ÿ 822 ÿ 558 6% 56%
ÿ
Selling, general and administrative ÿ 388 ÿ 370 ÿ 240 5% 62%
Research, development and engineering ÿ 56 ÿ 55 ÿ 41 1% 36%
ÿ ÿ Total operating expenses ÿ 444 ÿ 425 ÿ 281 4% 58%
ÿ Operating income ÿ 429 ÿ 397 ÿ 277 8% 55%
Financing and other income ÿ 7 ÿ 16 ÿ 10 ÿ ÿ
Income before income taxes ÿ 436 ÿ 413 ÿ 287 6% 52%
Income taxes ÿ 131 ÿ 128 ÿ 89 ÿ ÿ
ÿ ÿ Net income $ 305 $ 285 $ 198 7% 54%
ÿ
ÿ ÿ Basic earnings per common share* $ 0.48 $ 0.44 $ 0.29 9% 66%
ÿ
ÿ ÿ Diluted earnings per common share* $ 0.44 $ 0.40 $ 0.27 10% 63%
ÿ
Weighted average shares* ÿ
Basic ÿ 637 ÿ 641 ÿ 675 ÿ ÿ
Diluted ÿ 700 ÿ 706 ÿ 734 ÿ ÿ
ÿ
Percentage of Sales: ÿ
ÿ ÿ Gross margin ÿ 22.3% ÿ 22.0% ÿ 21.6% ÿ ÿ
Selling, general and administrative ÿ 9.9% ÿ 9.9% ÿ 9.3% ÿ ÿ
Research, development and engineering ÿ 1.5% ÿ 1.5% ÿ 1.6% ÿ ÿ
ÿ ÿ Total operating expenses ÿ 11.4% ÿ 11.4% ÿ 10.9% ÿ ÿ
ÿ Operating income ÿ 10.9% ÿ 10.6% ÿ 10.7% ÿ ÿ
Income before income taxes ÿ 11.1% ÿ 11.0% ÿ 11.1% ÿ ÿ
ÿ ÿ Net income ÿ 7.8% ÿ 7.6% ÿ 7.7% ÿ ÿ
Income tax rate ÿ 30.0% ÿ 31.0% ÿ 31.0% ÿ ÿ
ÿ
Revenue by geographic region: ÿ
% of total sales ÿ
Americas ÿ 67% ÿ 67% ÿ 67% ÿ ÿ
Europe ÿ 26% ÿ 27% ÿ 25% ÿ ÿ
Asia Pacific and Japan ÿ 7% ÿ 6% ÿ 8% ÿ ÿ
ÿ
Revenue by product line: ÿ
% of system sales ÿ
Desktops ÿ 66% ÿ 67% ÿ 74% ÿ ÿ
Enterprise ÿ 11% ÿ 11% ÿ 6% ÿ ÿ
Portables ÿ 23% ÿ 22% ÿ 20% ÿ ÿ
Total system revenue ÿ 100% ÿ 100% ÿ 100% ÿ ÿ
Non-system revenue (peripherals, other);% of total sales ÿ 6% ÿ 8% ÿ 10% ÿ ÿ
ÿ
Note: Percentage growth rates and ratios are calculated based on underlying data in thousands.
*Restated to reflect two-for-one stock split effected on March 6, 1998.
ÿ
ÿ
ÿ
DELL COMPUTER CORPORATION
Condensed Consolidated Statement of Financial Position and Related Financial Highlights
(in millions, except for "Ratios" and "Other Information")
(unaudited)
ÿ May 3,
1998 February 1,
1998 May 4,
1997
Assets: ÿ
Current assets: ÿ
ÿ Cash $ 444 $ 320 $ 140
ÿ Marketable securities ÿ 1,965 ÿ 1,524 ÿ 1,302
ÿ Accounts receivable, net ÿ 1,536 ÿ 1,485 ÿ 991
ÿ Inventories ÿ 254 ÿ 233 ÿ 266
ÿ Other ÿ 349 ÿ 350 ÿ 280
ÿ ÿ Total current assets ÿ 4,548 ÿ 3,912 ÿ 2,979
Property, plant and equipment, net ÿ 391 ÿ 342 ÿ 252
Other ÿ 15 ÿ 14 ÿ 12
Total assets $ 4,954 $ 4,268 $ 3,243
ÿ
Liabilities and Stockholders' Equity: ÿ
Current liabilities: ÿ
ÿ Accounts payable $ 1,727 $ 1,643 $ 1,146
ÿ Accrued and other liabilities ÿ 996 ÿ 1,054 ÿ 707
ÿ ÿ ÿ Total current liabilities ÿ 2,723 ÿ 2,697 ÿ 1,853
Long-term debt ÿ 512 ÿ 17 ÿ 18
Other liabilities ÿ 295 ÿ 261 ÿ 251
ÿ ÿ ÿ Total liabilities ÿ 3,530 ÿ 2,975 ÿ 2,122
Put options ÿ -- ÿ -- ÿ 264
Stockholders' equity ÿ 1,424 ÿ 1,293 ÿ 857
Total liabilities and stockholders' equity $ 4,954 $ 4,268 $ 3,243
ÿ
Ratios: ÿ
Quick ratio ÿ 1.45 ÿ 1.23 ÿ 1.31
Current ratio ÿ 1.67 ÿ 1.45 ÿ 1.61
Days in inventory ÿ 8 ÿ 7 ÿ 12
Days in accounts receivable ÿ 35 ÿ 36 ÿ 34
Days in accounts payable ÿ 51 ÿ 51 ÿ 51
ÿ
Other information: ÿ
Headcount (approximate) ÿ 17,800 ÿ 16,200 ÿ 11,700
Average total revenue/unit (approximate) $ 2,500 $ 2,600 $ 2,700
Return on invested capital* ÿ 229% ÿ 217% ÿ 168%
ÿ
* Calculation excludes cash and marketable securities in excess of 5% of annualized revenue.
Note: Ratios are calculated based on underlying data in thousands
Copyright 1998 Dell Computer Corporation. All rights reserved.
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