DJ - Dell Posts Rise In Net; CEO Says Industry Outlook Better
02/15/2002
Dow Jones News Services
(Copyright © 2002 Dow Jones & Company, Inc.)
By Bob Sechler
Of DOW JONES NEWSWIRES
AUSTIN, Texas (Dow Jones)--Dell Computer Corp. (DELL) Chief Executive Michael Dell said Thursday that the outlook for the computer industry is improving, but he declined to predict the timing for an overall economic rebound.
"I don't think the economy is going to come roaring back in one quarter," Dell said. "It's going to be more of a gradual and gentle recovery."
Earlier Thursday, Dell Computer reported net income of $456 million, or 17 cents a share, for its fiscal fourth quarter, up from net income of $434 million, or 16 cents a share, in the year-ago period. Sales fell 7% to $8.06 billion, from $8.67 billion a year ago.
The results were in line with new guidance that Dell provided in January, when it told Wall Street that it would beat prior projections. Previously, Dell had forecast fourth-quarter earnings of 16 cents a share on about $7.6 billion in sales.
CEO Dell, speaking on a conference call with reporters, said he thinks conditions within his industry are improving. Still, he stopped well short of predicting the timing for any major spending rebounds or forecasting a recovery in the second half.
"The fact is, we don't know," he said. "We're prepared to profitably grow really no matter what conditions are out there. And as this market comes back, Dell is best positioned for recovery."
He declined to forecast any financial results for his company beyond the first quarter.
Dell officials said they expect to earn 16 cents a share in the first quarter, with sales sliding 3% to 5% from the fourth quarter, based partly on seasonal factors. That would put Dell's first-quarter revenue at $7.6 billion to $7.82 billion.
Those estimates are in line with Wall Street's current first-quarter expectations for Dell Computer to earn 16 cents a share on revenue of $7.6 billion, according to Thomson Financial/First Call.
The company earned 17 cents a share, excluding items, on $8 billion in revenue in the year-ago first quarter.
Dell shares climbed slightly after-hours Thursday, trading at $26.97 after closing Thursday's regular session off about 2% at $26.81.
Dell Computer said its worldwide fourth-quarter shipments climbed 14% from the third quarter and 11% from the year-ago fourth quarter. Meanwhile, the industry saw fourth-quarter shipments shrink 6.7% from the year-ago period, according to recent data.
"We did exceptionally well on all counts" in the fourth quarter, Chief Financial Officer Jim Schneider said.
Overall, Dell officials touted their fourth quarter results as continued evidence of their ability to outperform the industry and profitably gain market share amid the sluggish economy.
Recent industry data bolster that contention. Dell was the only major vendor to increase sales and market share in both the fourth quarter and 2001, according to International Data Corp. and Gartner Inc.'s (IT,) Dataquest unit.
Dell saw particular strength in its consumer business, which has been a focus for it. The company said its fourth-quarter shipments to home users climbed 56% from the third quarter and 38% from the year-ago period.
"We've built some really good momentum" in consumer sales, Schneider said later on a conference call with analysts.
Dell officials made clear that they expect the overall market-share gains to continue. They said they expect a 10% decline in first-quarter shipments industrywide from the fourth quarter, partly due to seasonal factors, compared with their projections for decline of only 3% to 5% for Dell.
The company's gross margin came in at 17.6% for the fourth quarter, flat with the third quarter but off slightly from 18% in the year-ago fourth quarter. The firm's average selling price came in at about $1,700, down from $1,800 in the third quarter and from slightly over $2,000 in the year-ago fourth quarter.
Dell officials had little to say on the proposed merger between Hewlett-Packard Co. (HWP) and Compaq Computer Corp. (CPQ).
Previously, CEO Dell has said his company was benefiting from customer confusion regarding the merger.
"We're prepared to compete with these companies whether they're separate or combined, or any combination you can dream of," Dell said Thursday.
He also said Dell Computer isn't seeing any unexpected changes in industry pricing.
Last month, Gateway Inc. (GTW) warned Wall Street that it will report losses for the next few quarters as it begins its own campaign of aggressive price-cutting to stem market-share erosion, which has come primarily at the hands of Dell Computer.
"Certainly, competitors are moving their prices around on a constant basis," CEO Dell said. "Dell sustains a pretty substantial cost advantage ... and our advantage there appears to be expanding."
He said Dell Computer is in a stronger competitive position "than any time in our history."
Component prices have stabilized from steep declines in 2001 but continue to trend down, he said.
Meanwhile, Dell said he sees some substantial potential growth drivers this year, even as he declined to predict when they might fuel a rebound. He cited in particular a traditional upgrade cycle in computer equipment, which has generally occurred every three years.
"We do know that there a lot of machines out there that are getting up in age," Dell said. "Probably 75% of the installed base can't run (Microsoft Corp.'s) Windows XP" operating system.
Once again, however, he declined to predict when a substantial cycle of upgrades might begin.
-By Bob Sechler; Dow Jones Newswires; 512-236-9637
(END) DOW JONES NEWS 02-15-02 |
