DELL-- Dell boosts its earnings target
By Mike Tarsala, CBS.MarketWatch.com
Last Update: 10:47 PM ET July 11, 2002
AUSTIN, Texas (CBS.MW) -- Dell Computer cited market share gains in raising its second-quarter sales and profit targets Thursday, providing tech investors a break from a weeks-long string of warnings in the tech sector.
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Shares of Dell (DELL: news, chart, profile) rose $1.47, or 6 percent, in after-hours trading to $25.40. The stock rose 23 cents to close at $23.93 in the regular session.
Dell, the No. 2 computer manufacturer worldwide behind Hewlett-Packard (HPQ: news, chart, profile), now expects sales of $8.3 billion, up about 9 percent from the same period last year. Analysts had projected the company to post revenue of about $8.2 billion, according to Thomson Financial/First Call.
"Senior people from Dell just said yesterday that they don't see any immediate pickup in the PC market, so the fact that Dell can raise earnings and sales is a tribute to the company's operational expertise and their competitive capabilities -- not a tribute to the market as a whole," said Michael Boyle, chairman of the Boyle Marathon Fund (BFUNX: news, chart, profile). He says that computer hardware customers have yet to significantly increase spending on either personal computers or servers.
In April, management at Dell projected that personal-computer shipments industrywide would fall 5 percent, while Dell's would rise 3 percent. The company seems to have met its goal, said Dan Niles, analyst with Lehman Bros.
"This will be the second quarter that Dell beat expectations by a penny on the bottom line," Niles said. "They're continuing to do what they do well."
Dell expects second-quarter earnings of 19 cents a share. Dell had reported a loss in the year-ago period, including a special charge. Wall Street had been expecting the company to earn 18 cents a share in the second quarter.
The computer company stands out as one of the only high-profile tech manufacturers to guide second-quarter financial targets higher. Fellow computer-maker Apple Computer (AAPL: news, chart, profile), chipmakers Intel (INTC: news, chart, profile) and Advanced Micro Devices (AMD: news, chart, profile), and software-maker SAP (SAP: news, chart, profile) are among the leading tech concerns that have issued recent sales or earnings warnings.
Strength in Dell's business is "broadly based, highlighted by growth in the U.S. education, government and consumer business segments," the company said in a statement. Management added that it expects the company's operating profit as a percent of revenue to be up sharply from the most recent and year-ago quarters.
"For other industry players, a Dell with a higher margin means more pressure ahead," Bear Stearns analysts wrote to clients. The brokerage added that upcoming industry market-share statistics will show overall gains for Dell vs. Hewlett-Packard, Apple and Gateway (GTW: news, chart, profile).
"Clearly, they have the model to continue to take market share," added Chris Bonavico, manager of the TransAmerica Premier Aggressive Growth Fund (TPAGX: news, chart, profile). "They are performing extraordinarily well in a difficult market."
Dell's second quarter ends Aug. 2. The company plans to announce its second-quarter results and third-quarter sales and earnings targets on Aug. 15. |
