Dell Earnings Rise 72 Percent On 54-Percent Revenue Growth; Company Advances to No. 2
Position Worldwide, Announces 2-for-1 Stock Split
Business Wire - August 18, 1998 16:32
ROUND ROCK, Texas--(BUSINESS WIRE)--Aug. 18, 1998--Dell Computer Corporation (Nasdaq:DELL) today reported that earnings per share increased 72
percent to $.50 for the quarter ended Aug. 2, 1998.
Revenues increased 54 percent to more than $4.3 billion. On a unit shipment basis, Dell advanced to the No. 2 position in the computer systems industry, according
to industry-analyst reports.
Dell also announced today that its Board of Directors has declared a 2-for-1 stock split. This split, the sixth in the last six years, will be paid in the form of a
100-percent stock dividend to be issued on Sept. 4, 1998, to shareholders of record as of Aug. 28, 1998. All per-share data are presented prior to this split.
(in millions, except per share data)
Yr. to Yr.
Q2 FY'99 Q2 FY'98 Growth
Net Revenues $ 4,331 $ 2,814 54%
Operating Income $ 483 $ 296 63%
Net Income $ 346 $ 214 62%
Earnings Per Share $ 0.50 $ 0.29 72%
"Our sustained growth and solid performance across all segments and regions continue to underscore the strength and efficiencies of our direct business model," said
Michael Dell, chairman and chief executive officer. "We believe that our performance positions us as No. 1 in profitability, revenue growth and unit growth among
major systems companies worldwide.
"We again provided superior value to our shareholders, growing at more than six times the industry rate," said Mr. Dell. "Our unique direct business model has
allowed us to take advantage of rapidly declining component costs and pass along savings to our customers, while delivering industry-leading profitability."
Company Maintains Consistent Focus on Asset Management
Dell again achieved one of the most liquid balance sheets in the industry, generating $641 million in cash from operations. The company closed the quarter with cash
and marketable securities of more than $2.6 billion, despite having repurchased 11 million additional shares during the quarter. Dell has repurchased 171 million
shares since it initiated its share repurchase program two and one-half years ago.
Dell continued to lead the computer systems industry with a return on invested capital of 217 percent and eight days of inventory, the equivalent of 46 inventory turns
per year.
Gross margin increased to 22.7 percent from 22.2 percent in the year-ago quarter. Operating expenses were 11.6 percent, the same level as in the year-ago quarter,
as the company continued to invest in infrastructure to support growth. As a result, operating income was a record 11.1 percent.
Dell Ranked No. 1 in U.S. Desktop Market, No. 2 Overall in Europe; Asia-Pacific/Japan Continues Profitable Growth
Dell accounted for more than half of all unit-shipment growth in the computer systems industry worldwide in the quarter, according to analysts, as the company
continued its momentum in all geographic regions and customer segments.
With revenues of nearly $3 billion, Dell's business in the Americas region grew 50 percent, more than five times the growth rate in the computer systems industry in
the region. Gains in the Americas reflected strong demand from enterprise customers and individual consumers.
In the U.S. desktop systems market, Dell achieved the No. 1 position in unit shipments, according to industry analyst reports.
The company advanced to the No. 2 position in Europe in overall unit shipments, according to analysts. Revenues grew at a rate of 73 percent, which was more than
three times that of the industry in the region. In five European countries Dell grew more than 100 percent.
Dell continued its profitable growth in the Asia-Pacific region including Japan, despite the fact that the computer systems industry declined 9 percent in unit
shipments. Revenues increased 34 percent to $280 million. Also, the company has begun shipping products from its new customer center based in Xiamen, China.
Growth in Enterprise Systems Continues
Dell continued to set the pace for the industry in enterprise systems. It was the seventh consecutive quarter of revenue growth of more than 100 percent in enterprise
systems. At the end of its first year in the high-performance workstation market, the Dell Precision workstation line had gained the No. 2 position worldwide in
Windows NT workstations, according to industry analysts.
Supported by revenue growth of 84 percent, Dell's Latitude and Inspiron lines of notebook products allowed Dell to advance to the No. 4 position in notebooks
worldwide, while controlling the No. 3 position in the U.S., according to analysts.
During the quarter, Dell continued its overall product leadership, capturing approximately 100 awards for performance and value. Dell was the only company to win
PC Magazine's "Readers Choice Award" for service and reliability in both desktops and notebooks, marking the third consecutive year that Dell achieved the top
spot. The company also achieved enterprise-tier leadership in desktops and notebooks, according to Gartner Group.
Strong First-Half Momentum Highlights Continued Focus on Direct Model
"Our performance in the first half of the year illustrates how we have executed our direct model to provide customers with superior value, service and accountability,"
said Mr. Dell.
"We have continued to invest in the model, addressing areas that give us competitive advantages in technology, velocity and proximity to our customers. These
include our growing Internet business at www.dell.com, which now is generating worldwide sales of approximately $6 million per day; enhanced value-added
products and services aimed at the enterprise market; and expansion of our global resources and manufacturing capabilities in China, Europe and the Americas.
"Moving into the second half of the year, key industry conditions including demand, component cost declines and pricing remain healthy, and consolidation continues
to occur around the leading systems companies. We believe we are well-positioned to capitalize on these conditions to further our growing market leadership
position."
Ranked No. 125 among the Fortune 500 companies and No. 363 in the Fortune Global 500, Dell Computer Corporation is the world's leading direct computer
systems company, based on revenues of $15.2 billion for the past four quarters. Dell designs, manufactures and customizes products and services to customer
requirements and offers an extensive selection of software and peripherals. Information on Dell and its products can be obtained through its toll-free number
800/388-8542 or by accessing the Dell World Wide Web site at www.dell.com.
Latitude is a registered trademark, and Inspiron and Dell Precision are trademarks 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)
Three Months Ended
-------------------------------------
August 2, May 3, August 3,
1998 1998 1997
--------- --------- ---------
Net revenue $ 4,331 $ 3,920 $ 2,814
Cost of revenue 3,346 3,047 2,190
--------- --------- ---------
Gross margin 985 873 624
Selling, general
and administrative 436 388 280
Research, development
and engineering 66 56 48
--------- --------- ---------
Total operating expenses 502 444 328
--------- --------- ---------
Operating income 483 429 296
Financing and other 11 7 14
--------- --------- ---------
Income before income taxes 494 436 310
Provision for income taxes 148 131 96
--------- --------- ---------
Net income $ 346 $ 305 $ 214
========= ========= =========
Basic earnings per
common share(a) $ 0.55 $ 0.48 $ 0.32
========= ========= =========
Diluted earnings per
common share(a) $ 0.50 $ 0.44 $ 0.29
========= ========= =========
Weighted average shares
outstanding(a)
Basic 632 637 663
Diluted 696 700 729
Note: Percentage growth rates and ratios are calculated based on
underlying data in thousands.
(a) Restated to reflect the two-for-one common stock split effected on
March 6, 1998.
% Growth Rates
------------------------------------------
Sequential Yr. to Yr.
------------------------------------------
Net revenue 10 % 54 %
Cost of revenue 10 % 53 %
Gross margin 13 % 58 %
Selling, general
and administrative 13 % 56 %
Research, development
and engineering 17 % 37 %
Total operating expenses 13 % 53 %
Operating income 13 % 63 %
Financing and other -- --
Income before income taxes 13 % 59 %
Provision for income taxes -- --
Net income 13 % 62 %
Basic earnings per
common share(a) 15 % 72 %
Diluted earnings per
common share(a) 14 % 72 %
Note: Percentage growth rates and ratios are calculated based on
underlying data in thousands.
(a) Restated to reflect the two-for-one common stock split effected on
March 6, 1998.
Three Months Ended
-------------------------------------
August 2, May 3, August 3,
1998 1998 1997
--------- --------- ---------
Percentage of Net Revenue:
Gross margin 22.7 % 22.3 % 22.2 %
Selling, general and
administrative 10.1 % 9.9 % 9.9 %
Research, development
and engineering 1.5 % 1.5 % 1.7 %
Total operating expenses 11.6 % 11.4 % 11.6 %
Operating income 11.1 % 10.9 % 10.6 %
Income before income taxes 11.3 % 11.1 % 11.0 %
Net income 8.0 % 7.8 % 7.6 %
Income tax rate 30.0 % 30.0 % 31.0 %
Net revenue by geographic region:
% of total net revenue
Americas 69 % 67 % 71 %
Europe 25 % 26 % 22 %
Asia-Pacific and Japan 6 % 7 % 7 %
Net revenue by product line:
% of system net revenues
Desktops 66 % 66 % 73 %
Servers 12 % 11 % 8 %
Portables 22 % 23 % 19 %
--------- --------- ---------
Total system net revenues 100 % 100 % 100 %
========= ========= =========
Non-system net revenues
(peripherals,other); 6 % 6 % 8 %
% of total system net revenues
Note: Percentage growth rates and ratios are calculated based on
underlying data in thousands.
(a) Restated to reflect the two-for-one common stock split effected on
March 6, 1998.
DELL COMPUTER CORPORATION
Condensed Consolidated Statement of Income
and Related Financial Highlights
(in millions, except per share data)
(unaudited)
Year To Date
-----------------------
August 2, August 3, Yr. to Yr.
% Growth
1998 1997 Rates
--------- --------- ------------
Net revenue $ 8,251 $ 5,402 53 %
Cost of revenue 6,393 4,220 51 %
--------- ---------
Gross margin 1,858 1,182 57 %
Selling, general
and administrative 824 520 58 %
Research, development
and engineering 122 89 37 %
--------- ---------
Total operating expenses 946 609 55 %
--------- ---------
Operating income 912 573 59 %
Financing and other 17 24 --
--------- ---------
Income before income taxes 929 597 56 %
Provision for income taxes 279 185 --
--------- ---------
Net income $ 650 $ 412 58 %
========= =========
Basic earnings per
common share(a) $ 1.03 $ .62 66 %
========= =========
Diluted earnings per
common share(a) $ .93 $ .56 66 %
========= =========
Weighted average shares
outstanding(a)
Basic 634 668
Diluted 698 740
Percentage of Net Revenue:
Gross margin 22.5 % 21.9 %
Selling, general and
administrative 10.0 % 9.6 %
Research, development and
engineering 1.5 % 1.6 %
Total operating expenses 11.5 % 11.2 %
Operating income 11.0 % 10.7 %
Income before income taxes 11.2 % 11.0 %
Net income 7.9 % 7.6 %
Income tax rate 30.0 % 31.0 %
Net revenue by
geographic region:
% of total net revenue
Americas 68 % 69 %
Europe 25 % 23 %
Asia-Pacific and Japan 7 % 8 %
Net revenue by product line:
% of system net revenues
Desktops 66 % 74 %
Servers 12 % 7 %
Portables 22 % 19 %
--------- ---------
Total system net revenues 100 % 100 %
========= =========
Non-system net revenues
(peripherals,other); 6 % 9 %
% of total system net revenues
Note: Percentage growth rates and ratios are calculated based on
underlying data in thousands.
(a) Restated to reflect the two-for-one common stock split effected on
March 6, 1998.
DELL COMPUTER CORPORATION
Condensed Consolidated Statement of Financial
Position and Related Financial Highlights
(in millions, except for "Ratios" and "Other information")
(unaudited)
August 2, May 3, August 3,
1998 1998 1997
---------- ---------- ----------
Assets:
Current assets:
Cash $ 511 $ 444 $ 194
Marketable securities 2,107 1,965 1,321
Accounts receivable, net 1,800 1,536 1,133
Inventories 288 254 273
Other 394 349 331
---------- ---------- ----------
Total current assets 5,100 4,548 3,252
Property, plant and
equipment, net 446 391 288
Other 14 15 12
---------- ---------- ----------
Total assets $ 5,560 $ 4,954 $ 3,552
========== ========== ==========
Liabilities and
Stockholders' Equity:
Current liabilities:
Accounts payable $ 1,928 $ 1,727 $ 1,285
Accrued and other
liabilities 1,209 996 778
---------- ---------- ----------
Total current liabilities 3,137 2,723 2,063
Long-term debt 512 512 17
Deferred revenue on
warranty contracts 244 238 231
Other liabilities 68 57 29
---------- ---------- ----------
Total liabilities 3,961 3,530 2,340
Put options -- -- 85
Stockholders' equity 1,599 1,424 1,127
---------- ---------- ----------
Total liabilities and
stockholders' equity $ 5,560 $ 4,954 $ 3,552
========== ========== ==========
Ratios:
Current ratio 1.63 1.67 1.58
Quick ratio 1.41 1.45 1.28
Days supply in inventory 8 8 11
Days of sales in accounts
receivable 37 35 37
Days in accounts payable 52 51 53
Other Information:
Headcount (approximate) 20,800 17,800 13,300
Average total revenue/unit
(approximate) $ 2,400 $ 2,500 $ 2,700
Return on invested capital(a) 217 % 229 % 167 %
(a) Calculation excludes cash and marketable securities in excess of
5% of annualized revenue.
Note: Ratios are calculated based on underlying data in thousands.
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