Monday November 24, 4:15 pm Eastern Time
Company Press Release
SOURCE: Dell Computer Corporation
Strength Of Dell'S Direct Business Model Fuels Fifteenth Consecutive Record Quarter
Revenues Increase 58 Percent and Earnings Rise 77 Percent; Company Captures Number 2 U.S. Market Position
ROUND ROCK, Texas, Nov. 24 /PRNewswire/ -- Dell Computer Corporation (Nasdaq: DELL - news), the world's leading direct computer systems company, today reported record revenues for the fifteenth consecutive quarter. Revenues for the quarter ended November 2, 1997, were nearly $3.2 billion, an increase of 58 percent over the third quarter last year. Net income rose 71 percent over the year-ago quarter to $248 million, and earnings per share increased 77 percent to $0.69 compared with $0.39 a year ago.
On a unit shipment basis, Dell continued to grow at more than three times the industry rate during the quarter. This enabled the company to capture the number two market position in the U.S. for the first time, according to Dataquest. Dell maintained its number three market position worldwide.
(in millions, except per share data)
Q3 FY'98 Q3 FY'97
Net Sales $3,188 $2,019
Operating Income $346 $202
Net Income $248 $145
Earnings Per Share $0.69 $0.39
Weighted Avg. Shares O/S 360 382
''We continued to execute well in all key areas of our business, achieving a record return on invested capital of 178 percent,'' said Michael Dell, chairman and chief executive officer. ''We believe this is the highest return on invested capital in our industry.
''Our average revenues per unit again remained stable this quarter, in contrast to many in our industry. This clearly reflects the fact that our customers continue to purchase more fully featured systems. It also underscores the solid growth of our enterprise business.
''Our strong results continue to differentiate us from competitors, several of which are attempting to imitate aspects of Dell's unique direct business model. We believe that our customers around the world recognize the Dell difference and increasingly appreciate the benefits, stability and strength of our direct model.''
Dell generated $395 million in cash from operations and ended the quarter with $1.6 billion in cash and marketable securities. This is up $100 million despite the fact that the company spent approximately $300 million to repurchase an additional 9 million shares of Dell stock. Since its share repurchase program was initiated in February 1996, Dell has repurchased 68 million shares and has contractual arrangements covering another 27 million shares.
INDUSTRY-LEADING ASSET MANAGEMENT CONTINUES
The company maintained its operational focus on disciplined asset management during the third quarter. Once again, Dell led the industry with a record 11 days of inventory, the equivalent of 33 inventory turns on an annual basis.
Gross margin increased slightly from 22.2 percent in the second quarter of the current fiscal year to 22.5 percent, while operating expenses remained stable at 11.6 percent. This resulted in an increase in operating margin from 10.6 percent in the second quarter to 10.9 percent in the current quarter.
GLOBAL GAINS CONTINUE
The company executed consistently and achieved strong performance across all geographic regions, customer segments and product lines.
With revenues of nearly $2.3 billion, the Americas region increased 63 percent over the same period last year. Sales gains in the Americas were led by continuing strong demand among corporate, government and education accounts.
In Europe, Dell strengthened its position as the number five computer systems company in the region, based on unit shipments. With quarterly revenues of $700 million, Dell's European business grew 45 percent over last year.
Dell's business in Asia-Pacific, including Japan, also was strong. Quarterly revenues in the region grew 52 percent over the same period last year.
SUSTAINED ENTERPRISE MOMENTUM; MORE THAN FOURFOLD GROWTH ACHIEVED
Dell's momentum as a leading provider of enterprise systems continued during the third quarter, as year-over-year revenue growth exceeded 340 percent. The company's enterprise business, including servers and workstations, now represents 10 percent of Dell's total systems revenues. According to IDC, Dell is now tied for the number two position in the U.S. server market and is number four worldwide, based on unit shipments.
Revenues from the company's Latitude and Inspiron lines of notebooks grew 46 percent over the third quarter of last year, and revenues from Dell's OptiPlex and Dimension lines of desktops grew a combined 48 percent. Dell's award-winning notebooks and desktops continued to receive outstanding reviews, with more than 250 awards in major technology publications garnered in the first three quarters of fiscal 1998. Most recently, Dell's Dimension XPS D300 achieved top industry honors, winning the PC/Computing MVP and Computing Product of the Year awards, among others.
During the quarter, the company successfully applied the same customer segmentation strategy to its notebook business that it has used with desktops. Dell's new Inspiron notebook line is targeted at individuals or small- to medium-sized businesses who require the highest performance systems at aggressive prices. The new Latitude notebook line is designed for corporate and institutional customers working in networked environments who require predictable transitions, enhanced reliability, ease of connectivity and low product lifecycle costs.
INTERNET SALES TOP $3 MILLION A DAY
Dell also continued to expand its Internet commerce capability during the quarter. The company's Internet Web site (www.dell.com) now is generating sales of more than $3 million per day. This is equivalent to an annual run rate of approximately $1 billion.
The company expanded its array of products and services to the consumer market, as the base of experienced users steadily widens. During the quarter, Dell's consumer business in the Americas grew significantly faster than the overall company growth rate.
During the quarter, Dell accelerated its value-added services program, including factory integration of customer hardware and software requirements. In the Americas, customer demand for factory integrated solutions increased more than threefold over the year-ago quarter.
The company also broadened its services to global companies through its Global Enterprise Program. This program now includes more than 50 global accounts with an annual run rate well in excess of $1 billion.
SOLID DEMAND OUTLOOK; TRANSITION TO NEXT LEVEL OF DIRECT MODEL ACCELERATES GROWTH
''The outlook for overall demand in the computer systems industry remains very healthy,'' said Mr. Dell. ''Declines in key component costs combined with improved processor performance are likely to drive continued strong demand as we move into the new year.
''We believe we are well positioned to take advantage of these favorable industry conditions. In the process, we remain focused on delivering superior value to our customers around the world, as we continue to develop the capabilities of our unique direct business model through the Internet and value-added services.''
Consolidated statements of income and financial position follow.
Ranked in the top 200 of Fortune 500(R) companies, Dell Computer Corporation is the world's leading direct computer systems company, based on revenues of $11 billion for the past four quarters. Dell designs and customizes products and services to end-user requirements, and offers an extensive selection of peripherals and software through the DellWare(R) program. Information on Dell and its products can be obtained through its toll-free number 1-800-388-8542 or by accessing the Dell World Wide Web server at www.dell.com.
Dell, Latitude, OptiPlex and Dell Dimension are registered trademarks and DellWare is a registered service mark of Dell Computer Corporation. Fortune 500 is a registered trademark of Time Inc.
Dell disclaims any proprietary interest in the marks and names of other companies.
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 personal computers; the intensity of competition; currency fluctuations; the cost of certain key components; and the company's ability to effectively manage product transitions and component availability, 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.
DELL COMPUTER CORPORATION
Condensed Consolidated Statement of Income and
Related Financial Highlights
(in millions, except per share data)
(unaudited)
Three Months Ended % Growth Rates
Nov. 2, Aug. 3, Oct. 27, Sequential Yr. to Yr.
1997 1997 1996
Net sales $ 3,188 $ 2,814 $ 2,019 13% 58%
Cost of sales 2,471 2,190 1,569 13% 57%
Gross margin 717 624 450 15% 60%
Selling, general
and administrative 312 280 215 12% 45%
Research, development
and engineering 59 48 33 23% 80%
Total operating
expenses 371 328 248 13% 49%
Operating income 346 296 202 17% 72%
Financing and other
income (expense), net 13 14 8 --- ---
Income before
income taxes 359 310 210 16% 71%
Income taxes 111 96 61 --- ---
Income before
extraordinary loss 248 214 149 16% 67%
Extraordinary loss,
net of taxes --- --- (4) --- ---
Net income $ 248 $ 214 $ 145 16% 71%
Earnings per
common share:
Income before
extraordinary
loss $ 0.69 $ 0.59 $ 0.39 17% 77%
Extraordinary loss,
net of taxes --- --- (0.01) --- ---
Earnings per
common share $ 0.69 $ 0.59 $ 0.38 17% 82%
Weighted average
shares: 360 364 382 --- ---
Percentage of Sales:
Gross margin 22.5% 22.2% 22.3%
Selling, general
and administrative 9.8% 9.9% 10.7%
Research, development
and engineering 1.8% 1.7% 1.6%
Total operating
expenses 11.6% 11.6% 12.3%
Operating income 10.9% 10.6% 10.0%
Income before
income taxes 11.3% 11.0% 10.4%
Income before
extraordinary loss 7.8% 7.6% 7.4%
Net income 7.8% 7.6% 7.2%
Income tax rate 31.0% 31.0% 29.0%
Revenue by geographic region:
% of total sales
Americas 72% 71% 70%
Europe 22% 22% 24%
Asia Pacific and Japan 6% 7% 6%
Revenue by product line:
% of system sales
Desktops 73% 73% 77%
Enterprise 10% 8% 4%
Portables 17% 19% 19%
Total system revenue 100% 100% 100%
Non-system revenue
(peripherals, other);
% of total sales 8% 8% 9%
Note: Percentage growth rates and ratios are calculated based on
underlying data in thousands.
DELL COMPUTER CORPORATION
Condensed Consolidated Statement of Income and
Related Financial Highlights
(in millions, except per share data)
(unaudited)
Year To Date
November 2, October 27, Yr. to Yr. %
1997 1996 Growth Rates
Net sales $ 8,590 $ 5,347 61%
Cost of sales 6,691 4,205 59%
Gross margin 1,899 1,142 66%
Selling, general and administrative 832 592 41%
Research, development and engineering 148 86 72%
Total operating expenses 980 678 45%
Operating income 919 464 98%
Financing and other income
(expense), net 36 19 ---
Income before income taxes 955 483 98%
Income taxes 296 140 ---
Income before extraordinary loss 659 343 92%
Extraordinary loss, net of taxes --- (13) ---
Net income $ 659 $ 330 100%
Earnings per common share:
Income before extraordinary loss $ 1.81 $ 0.88 106%
Extraordinary loss, net of taxes --- (0.03) ---
Earnings per common share $ 1.81 $ 0.85 113%
Weighted average shares: 364 388 ---
Percentage of Sales:
Gross margin 22.1% 21.4%
Selling, general and administrative 9.7% 11.1%
Research, development and engineering 1.7% 1.6%
Total operating expenses 11.4% 12.7%
Operating income 10.7% 8.7%
Income before income taxes 11.1% 9.0%
Income before extraordinary loss 7.7% 6.4%
Net income 7.7% 6.2%
Income tax rate 31.0% 29.0%
Revenue by geographic region:
% of total sales
Americas 70% 68%
Europe 23% 26%
Asia Pacific and Japan 7% 6%
Revenue by product line:
% of system sales
Desktops 73% 79%
Enterprise 8% 3%
Portables 19% 18%
Total system revenue 100% 100%
Non-system revenue
(peripherals, other);
% of total sales 9% 10%
Note: Percentage growth rates and ratios are calculated based on
underlying data in thousands.
DELL COMPUTER CORPORATION
Condensed Consolidated Statement of Financial Position and
Related Financial Highlights
(in millions, except for "Ratios" and "Other information")
(unaudited)
November 2, August 3, October 27,
1997 1997 1996
Assets:
Current assets:
Cash $ 222 $ 194 $ 87
Marketable securities 1,393 1,321 1,096
Accounts receivable, net 1,350 1,133 915
Inventories:
Production materials 244 234 181
Work-in-process and finished goods 57 39 35
Total inventories 301 273 216
Other current assets 341 331 177
Total current assets 3,607 3,252 2,491
Property, plant and equipment, net 301 288 223
Other assets 13 12 10
Total assets $ 3,921 $ 3,552 $ 2,724
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 1,488 $ 1,285 $ 911
Accrued and other liabilities 891 778 557
Total current liabilities 2,379 2,063 1,468
Long-term debt 17 17 18
Other liabilities 267 260 216
Total liabilities 2,663 2,340 1,702
Put options 51 85 171
Stockholders' equity 1,207 1,127 851
Total liabilities and
stockholders' equity $ 3,921 $ 3,552 $ 2,724
Ratios:
Current ratio 1.52 1.58 1.70
Quick ratio 1.25 1.28 1.43
Days in inventory 11 11 12
Days in accounts receivable 38 37 41
Days in accounts payable 54 53 52
Other information:
Headcount (approximate) 14,900 13,300 9,700
Average total revenue/unit
(approximate) $ 2,625 $ 2,700 $ 2,600
Return on invested capital (A) 178% 167% 111%
(A) Calculation excludes cash and marketable securities in excess of 5%
of annualized revenue.
Note: Ratios are calculated based on underlying data in thousands.
SOURCE: Dell Computer Corporation
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