Dell's Record First-Quarter Revenue, Net Income Driven By 52-Percent Increase in Sales of Enterprise Systems
Company Continues to Take Share Within Expanding Internet Infrastructure
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Round Rock, Texas, May 11, 2000
Dell again achieved industry-leading results against objectives of growth, profitability and liquidity during its fiscal first-quarter 2001, as the company broadened execution of a strategy to lead the massive ongoing build-out of the global Internet infrastructure.
First-quarter net revenue was up 31 percent, to $7.3 billion, and net income grew 21 percent, to $525 million. Quarterly per-share earnings totaled 19 cents, up 19 percent.
(in millions, except per-share data)
Q1 FY'01
Q1 FY'00
Change
Revenue
$7,280
$5,537
31%
Operating Income
$625
$600
4%
Net Income
$525
$434
21%
Earnings Per Share
$0.19
$0.16
19%
The portion of Dell's business attributable to more profitable products at both the core and edge of the Internet continued to increase: revenue from servers, storage products, workstations and notebook PCs rose to 48 percent of total system sales, up from 39 percent a year ago and a company record.
"The fundamental competitive advantages of our customer-focused direct business model are widening," said Michael S. Dell, chairman of the board and chief executive officer. "That's particularly true in the server and storage products at the heart of the Internet infrastructure."
Dell also expanded revenue and profitability beyond the base computer system, as worldwide services sales topped $500 million for the first time during the quarter, an increase of more than 50 percent.
Improved product mix together with lower-than-expected costs for key components helped the company simultaneously make investments in its Internet strategy and lift net margins from fourth-quarter levels. Operating expenses as a percent of revenue were 11.9 percent, and included spending for organization, training and research and development associated with growing Web-based opportunities. Net income as a percent of revenue was 7.2 percent.
Cash from first-quarter operations exceeded $760 million, part of which was used to repurchase 11 million shares of Dell common stock. Cash and investments stood at $7 billion at the end of the quarter, 75 percent higher than one year ago.
Dell achieved a record return on invested capital of 292 percent during the period, and ended the quarter with seven days of inventory.
Internet-Infrastructure Strategy Gains Momentum
Mr. Dell said global Internet-infrastructure spending is expected to reach $370 billion annually by 2003, and his company's broad application of Web-based tools throughout its business gives Dell considerable authority with customers determined to exploit the power of the Internet themselves. Last month, Dell detailed for investors and others how it is translating its expertise into developing new Web-related customers, products, services and partnerships. (Additional information about the company's Internet-infrastructure strategy is available online, at www.dell.com/howeworks .)
Dell's sales to the largest "dot-com" companies and application- and Internet-service providers, for example, have grown nearly 260 percent in just two quarters. In two months, the Dell Host Web-hosting service has gained more than 2,000 customers, 40 percent of them new to Dell and half of which switched from other hosting suppliers. And the company has begun shipping new PowerApp appliance servers designed for Internet tasks such as Web serving, caching and load balancing.
U.S. Share Leads for Fourth Straight Quarter
Dell's worldwide product shipments in the first quarter increased 32 percent, more than twice as fast as the average growth rate for the industry's 10 largest companies, as Dell maintained its No. 2 global ranking among all computer-systems companies.
Quarterly revenue in the Americas region was up 35 percent, and shipment growth more than doubled the industry average. The company's United States market share earned it the No. 1 industry rank for the fourth straight quarter, and Dell claimed the No. 1 share spot in Canada for the first time. Americas sales to small- and medium-sized business customers jumped 59 percent, and revenue from consumers rose 51 percent.
Dell Europe posted a 17-percent revenue increase, and product volume grew faster than the overall industry average. First-quarter sales in Asia-Pacific and Japan were up 47 percent, as Dell's shipment growth outpaced the industry rate.
U.S. Server Share Five Points Higher
Dell's quarterly increase in products at the core of the fast-growing Internet infrastructure was substantial, including a rise of more than 100 percent in sales of storage products. The company accounted for 40 percent of global industry growth in servers, gaining more than three points of worldwide market share and five full share points in the U.S., as the company again ranked No. 2 in the respective markets.
Shipments of PowerEdge servers expanded at two and one-half times the worldwide and U.S. industry rates. Dell Precision workstation volumes were up more than 80 percent, extending the company's leading global market share in that product category and contributing to a 52-percent increase in overall sales of enterprise-class computer systems.
In notebook PCs, the separation between Dell and the balance of the industry was even more pronounced. Total first-quarter revenue from the company's Inspiron and Latitude portable computers soared 67 percent, and shipment growth was twice the industry average. Dell for the first time moved to No. 2 in global notebook share, No. 1 in shipments to business customers worldwide, repeated its No. 1 U.S. ranking and moved to No. 3 in Europe.
About Dell
Dell Computer Corporation (Nasdaq: DELL) is the world's leading direct computer systems company, based on revenues of $27 billion for the past four quarters, and is a premier provider of products and services required for customers to build their Internet infrastructures. The company ranks No. 56 on the Fortune 500, No. 210 on the Fortune Global 500 and No. 3 on the Fortune "most admired" lists of companies. 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 on the World Wide Web at www.dell.com.
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Dell, PowerEdge, Inspiron and Latitude are registered trademarks and Dell Host and PowerApp trademarks of Dell Computer Corporation.
Fortune and Fortune 500 are registered trademarks, and Fortune Global 500 is a 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 the company's products and services; the intensity of competition; currency fluctuations; the cost and availability of certain key components; and the company's ability to effectively manage product transitions, 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.
Consolidated statements of income and financial position follow.
DELL
Condensed Consolidated Statement of Income and Related Financial Highlights
(in millions, except per share data) (unaudited)
Three Months Ended
% Growth Rates
April 28, 2000
January 28, 2000
April 30, 1999
Sequential
Yr. to Yr.
Net Revenue
$7,280
$6,801
$5,537
7.0%
31.5%
Cost of Revenue
5,788
5,497
4,347
5.3%
33.1%
Gross Margin
1,492
1,304
1,190
14.4%
25.4%
Selling, general and administrative
750
688
508
8.9%
47.6%
Research, development and engineering
117
103
82
14.1%
43.2%
Total operating expenses
867
791
590
9.6%
47.0%
Operating income
625
513
600
21.8%
4.2%
Financing and other
125
98
20
Income before income taxes
750
611
620
22.7%
21.0%
Provision for income taxes
225
175
186
Net income
$525
$436
$434
20.3%
21.0%
Basic earnings per common share
$0.20
$0.17
$0.17
17.6%
17.6%
Diluted earnings per common share
$0.19
$0.16
$0.16
18.8%
18.8%
Weighted average shares outstanding:
Basic
2,575
2,559
2,528
Diluted
2,737
2,731
2,738
Percentage of Net Revenue:
Gross Margin
20.5%
19.2%
21.5%
Selling, general and administrative
10.3%
10.1%
9.2%
Research, development and engineering
1.6%
1.5%
1.5%
Total operating expenses
11.9%
11.6%
10.7%
Operating income
8.6%
7.6%
10.8%
Income before income taxes
10.3%
9.0%
11.2%
Net income
7.2%
6.4%
7.8%
Income tax rate
30.0%
28.6%
30.0%
Net revenue by geographic region:
% of total net revenue
Americas
70%
71%
69%
Europe
22%
22%
24%
Asia-Pacific and Japan
8%
7%
7%
Net revenue by product line:
% of system net revenues
Desktops
52%
55%
61%
Enterprise
18%
17%
16%
Portables
30%
28%
23%
Total system net revenues
100%
100%
100%
Note: Percentage growth rates and ratios are calculated based on underlying data in thousands.
DELL
Condensed Consolidated Statement of Financial Position and Related Financial Highlights
(in millions, except for "Ratios" and "Other Information") (unaudited)
April 28, 2000
January 28, 2000
April 30, 1999
Assets:
Current assets:
Cash and Cash Equivalents*
$3,459
$3,809
$2,601
Short Term Investments*
269
323
915
Accounts receivable, net
2,708
2,608
2,151
Inventories
441
391
289
Other
617
550
561
Total current assets
7,494
7,681
6,517
Property, plant and equipment, net
796
765
536
Long Term Investments*
2,285
1,048
488
Equity Securities and Other Investments*
1,020
1,673
0
Goodwill
129
134
0
Other
299
170
22
Total Assets
$12,023
$11,471
$7,563
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable
$3,468
$3,538
$2,641
Accrued and other
1,835
1,654
1,247
Total current liabilities
5,303
5,192
3,888
Long-term debt
508
508
514
Other
589
463
346
Total liabilities
6,400
6,163
4,748
Stockholders' equity
5,623
5,308
2,815
Total liabilities and stockholders' equity
$12,023
$11,471
$7,563
Ratios:
Current Ratio
1.41
1.48
1.68
Quick ratio
1.21
1.30
1.46
Days supply in inventory
7
6
6
Days of sales in accounts receivable
33
34
35
Days in accounts payable
54
58
55
Other information:
Headcount (approximate)
35,800
36,500
26,100
Average total revenue/unit (approximate)
$2,300
$2,250
$2,300
Return on invested capital^
292%
281%
189%
Note: Ratios are calculated based on underlying data in thousands.
*Balances have been restated to reflect Q4FY00 reclassification of cash and cash equivalents, short term investments, long term investments, and equity securities and other investments.
^Calculation excludes cash and short term investments in excess of 5% of annualized revenue.
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