DELL's results with some comments from Kumar and other analysts about YK2 - relevant to CPQ:
FOCUS-Dell Q3 results in line, Y2K seen manageable
Thu Nov 11 20:28:00 EST 1999
By Eric Auchard
NEW YORK, Nov 11 (Reuters) - Dell Computer Corp.
on Thursday said third-quarter net profits, excluding a charge, were $483 million, matching recently lowered expectations tied to a shortages of key computer components, as revenues grew a healthy 41 percent.
Dell, the world's No. 2 maker of personal computers, said net income for the third quarter ended in October rose 21 percent to $483 million, or 18 cents per share, compared with $384 million, or 14 cents per share.
Revenue rose 41 percent to $6.78 billion, in line with Wall Street's expectations. Growth was driven by a 72-percent increase in sales of its powerful computers and storage systems to big businesses, as Dell shrugged off any pause in spending by corporate customers tied to Year 2000 computer repair.
Shares of Dell gained more than a point to $44.88 in
after-hours trading, up from a closing price of $43.44 on the Nasdaq stock market. Shares rose $2 in anticipation of the report, which was released after the regular trading session ended.
"It was a very strong quarter for us," Michael Dell, the
company's chairman, chief executive and founder, said afterward in a phone interview.
Third quarter net income excluded a previously disclosed
charge of $194 million, or 7 cents per share for ConvergeNet
Technologies Inc., a maker of high-speed storage equipment,
Dell's first ever acquisition. Including the charge, third
quarter net was $289 million, or 11 cents a share.
The latest quarter's profit was in line with Wall Street's consensus, according to First Call/Thomson Financial, which tracks broker estimates. The company had warned in mid-October that profit margins would be hurt by a spike in prices for computer memory chip components it uses to build PCs, leading analysts to temper their third quarter earnings estimates.
After the report, Dell executives said the company was
poised to dodge the Year 2000 spending pause that is expected to hurt results at some computer rivals into early next year.
"We expect that the fourth quarter is going to be a healthy one," Dell told Reuters, referring to the company's fiscal fourth quarter ending in January 2000. Analysts predict Dell revenue growth around 40 percent to continue into next year.
"There seems to be a group of customers that are buying at a more intense level -- small businesses certainly and we think consumers are going to be strong enough that they offset any Y2K effect," Dell said.
Some corporate customers, especially buyers of powerful PCs used to manage big business operations, have said they will pause in buying new equipment around the New Year in order to fix possible Year 2000 software glitches in older machines.
"We don't see a real concern in terms of customer buying
activity," Dell said.
Dell officials said the computer maker is focusing on
high-growth business segments such as Internet commerce sites, small businesses and consumers to offset any possible slowing among big corporate buyers.
"We are benefiting from the buildout of the dot.com world,"
Dell said, noting the company's No. 1 market position and focus on the small business market is paying off among emerging Web businesses.
Third quarter revenue from the Americas region climbed 45 percent, as Dell surged during the quarter to become the No. 1 PC supplier in terms of shipments in the United States for the irst time, moving ahead of struggling Compaq Computer Corp. , which nonetheless remains No. 1 worldwide.
European revenue rose 22 percent year-over-year, but a
strong 8 percent sequentially during the normally difficult
late summer selling season. In Asia-Pacific and Japan, Dell
shipments expanded at three times the industry rate, and
revenue rose 69 percent.
Nonetheless, Wall Street analysts remained cautious.
Several noted that while company executives painted a rosy picture of its outlook heading into early next year, Dell's tight PC sales turnaround cycles of as little as one week make it difficult to forecast results through the end of January.
"They feel good about Y2K in that on a net basis it won't effect them," Donaldson, Lufkin & Jenrette analyst Kevin McCarthy said after the conference call with Dell officials.
"(But) with 75 days left in the quarter, my confidence is not as high as there's," McCarthy said of Dell's fiscal fourth quarter ended in late January.
Ashok Kumar, an analyst with Minneapolis-based brokerage
Piper Jaffray, said Dell's third quarter results were
essentially in line with his forecasts.
"You have a company that is at an annualized rate of $25
billion growing at 40 percent plus," Kumar said of Dell's
continued gravity-defying financial performance. "No other
company does this at this magnitude of revenues," he said.
Internet sales, a key focus for the world's top direct PC seller, reached $35 million a day during the quarter, or 43 percent of overall revenue. On an annual basis, sales at
dell.com alone would be $12 billion, qualifying it for Fortune 125 status.
-- Eric Auchard, New York newsdesk, 212-859-1840))
REUTERS
Rtr 20:28 11-11-99
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