Tuesday February 16, 8:47 pm Eastern Time (Reuters)
FOCUS-Dell quarterly growth slows, stock shudders
(recasts lede, adds CEO, CFO comment, adds other details)
By Eric Auchard
NEW YORK, Feb 16 (Reuters) - Dell Computer Corp. (Nasdaq:DELL - news), the top direct seller of personal computers, on Tuesday posted quarterly profits in line with expectations but saw its torrid pace of revenue growth slacken somewhat, sending its stock tumbling late Tuesday.
Net income for Dell's fourth quarter ended Jan. 29, 1999, rose 49.2 percent to $425 million, or 31 cents per diluted share, compared to $285 million, or 20 cents per diluted share in the year-ago fourth quarter ended Feb. 1, 1998.
Revenues rose 38 percent to $5.2 billion from $3.7 billion in the year ago quarter, confirming recent investor fears that the pace of Dell's growth was letting up from the more than 50 percent year-to-year growth produced in recent quarters and the 66 percent annual growth rate reported 18 months ago.
The latest quarter's reported earnings matched Wall Street analysts' consensus, according to First Call, which surveys brokerage estimates. But revenues fell short of many brokerage projections and the company's own goals, Dell officials said.
''We just missed a beat,'' Dell CFO Tom Meredith said of the company's
disappointing revenue growth. ''We were not as aggressive in passing along our cost advantages as we should have been,'' he said.
Dell's direct ties to customers via the telephone and Web -- eliminating middlemen -- is designed to capitalize on its operating efficiencies by passing along cost savings to customers via lower product prices. Dell's aggressive pricing has proved a key differentiator the company has used in the past to win repeat buyers and fuel its explosive growth rates.
''The result was a rise in operating and net margins at the expense of top line growth,'' he said, referring to slower revenue growth.
The results led investors to dump Dell stock in after-hours trading, sending shares down $13.25 to $75.50 from their regular session Nasdaq close of $88.75, extending a slide begun two weeks ago when the popular technology holding hit $110.
In fairness, Dell continued to post extraordinary growth relative to any other major U.S. company. But the PC maker's history of explosive growth and its soaring stock price have been built on Dell's capacity consistently to deliver growth at a pace several times greater than the PC industry as a whole.
Nonetheless, Dell reported its twelfth consecutive quarter of annual earnings per share growth in excess of 50 percent, for example. Fourth quarter profit margins rose due in part to the growing percentage of high-margin servers, data storage systems and workstations as a percentage of total revenues.
Looking ahead, Dell officials vowed to move aggressively to pass along cost savings to customers in the form of lower PC prices and at the risk of lower margins to stoke the pace of future revenue growth while continuing to gain market share far faster than its key rivals -- Compaq, IBM and H-P.
Meredith told Wall Street analysts in a conference call broadcast live over the Internet -- the first time Dell has opened this key quarterly ritual to the public -- that the company's outlook for 1999 remains ''very bullish.''
''We are leaving the fourth quarter with the strongest pipeline (of new business) in company history,'' he said.
Meredith told financial analysts to continue to plan for single-digit sequential revenue growth in the historically softer first two quarters of the current fiscal year followed by double-digit sequential revenue growth in each of the last two quarters of the fiscal year ending in January 2000.
''We think it's going to be another very good year,'' added Michael Dell, the company's chairman, CEO and founder.
''What you are likely to see going forward is our growth is going to continue to exceed the market.'' Addressing financial analysts, Dell said, ''You are going to have to make your own judgment about how much.''
Sales via Dell's Web site topped $1 billion in the quarter, or $14 million a day. Meredith said the now $18 billion a year company is making rapid progress on meeting its goal of generating 50 percent of revenues through Internet sales.
He said several of its key business segments already are producing more than 30 percent of their revenues over the Web.
In an expected move, Dell said its board declared a 2-for-1 stock split, the seventh in the company's last seven years. The split will be paid in the form of a 100-percent stock dividend issued on March 5, to shareholders of record on Feb. 26. |
