D.J. - Here are some more numbers for you. Whats with that 5% decline in the hot laptop category? Also, heaven help the poor users, as Dell says it will further reduce warranty costs by trimming cost at it's tech support centers!!! Hope they have nice 'on hold' music for the callers <ggg>...
Regards,
John
PS - Will Mikey change his tune again later this year from 'gradual recovery' to 'recovery in 2003'???
Dell Posts 5% Gain in Profit
Amid Strong Home-PC Sales
By GARY MCWILLIAMS
Staff Reporter of THE WALL STREET JOURNAL
Dell Computer Corp. said fiscal fourth-quarter net income rose 5%, the first increase in four periods, on stronger-than-expected sales of personal computers for home use. It also forecast a "gradual and gentle recovery" in the PC business this year.
The Austin, Texas, computer maker's net rose to $456 million, or 17 cents a share, for the quarter ended Feb. 1, from year-earlier net of $434 million, or 16 cents a share, on slightly fewer shares. The year-earlier figure included a $105 million pretax charge for job and plant cuts.
Sales fell 7% to $8.06 billion from $8.67 billion, but still were ahead of the $7.98 billion expected by analysts surveyed by Thomson Financial/First Call.
Strong sales of home-PCs had spurred the company in mid-January to raise its financial forecasts. Like many PC makers, Dell lowered sales expectations in the fall, then boosted its forecasts as consumer demand started to rebound. Dell's home-PC revenue jumped 40% from its fiscal third quarter, to about $1.6 billion.
Dell said holiday sales pushed up home-PC revenue, but that such sales likely would decline in the current period. Overall, the company said its first-quarter profit would slip to about $432 million, or 16 cents a share, on a 3% to 5% decline in revenue. That forecast is in line with analysts' estimate for a profit of 16 cents a share on revenue of $7.64 billion, according to Thomson Financial. For the year-earlier first quarter, Dell reported a profit of $462 million, or 17 cents a share, on sales of $8.03 billion.
Chief Executive Michael S. Dell sounded a cautious note on the company's hopes for an industrywide recovery in the second half. In the fall, Mr. Dell said pent-up demand pointed to a strong second-half recovery. Thursday, he said business "has been trending gradually in an upward direction. We've seen stabilization to slight strengthening." Rather than a strong upturn, Mr. Dell now sees "a gradual and gentle recovery" this year.
James M. Schneider, Dell's chief financial officer, added, "You'll need some economy recovery to get a strong upturn" in the second half.
In after-hours trading Thursday, Dell rose to $27.05, after falling to $26.81 by 4 p.m. in Nasdaq Stock Market trading, down 53 cents. Its shares are largely unchanged since closing Dec. 31 at $27.18.
"With consumer demand waning, as it typically does in the first half, and corporate demand continuing to be sluggish, we're expecting relatively stagnant revenue for the first half of the year," said David Bailey, a computer analyst at securities firm Gerard Klauer Mattison.
Analysts pointed out that while Dell remains the only PC maker to gain market share and keep posting profits, its higher-profit-margin server and storage operations combined contributed just 18% of its revenue, flat over the past 18 months. Mr. Dell said the ratio remains unchanged because it is expanding its PC business in tandem with its server and storage businesses.
"The stock is selling at 40 times [projected] earnings," says Walter Winnitzki, a computer analyst at New York securities firm First Albany Corp. "No one will be paying 40 times earnings for a PC stock, no matter how good."
The company said revenue per PC fell to $1,700 from $2,050 a year ago, but its unit shipments rose 11%, compared with an industrywide decline of 6% in the December period.
Dell continues to take market share from rivals. It was the only big PC maker to increase its unit sales and market share in the fourth quarter and for all of 2001, according to market researchers. Dell also lowered operating expenses to just 10.2% of revenue, down more than two percentage points from the year-earlier period.
Dell said revenue from desktop PCs rose 17%, while revenue from notebook PCs declined 5% and revenue from servers, workstations and storage devices climbed 2% from the third quarter. The company didn't break out actual revenue for each line.
The company said while component prices have stopped falling at last summer's rate of 1% a week, it still expects to cut costs by focusing on other expenses. With its low inventories, Dell can use lower component costs to underprice rivals.
This year, it plans to lower expenses by consolidating manufacturing, reduce warranty costs and trimming the costs of its technical support and call centers. The company already has shifted some notebook PC production to Malaysia and telephone call center work to India. The company didn't reveal a target but said it can continue to lower its overhead to underprice rivals. |
