Dell net up on non-US sales; shares slip on outlook

Philipp Gollner

SAN FRANCISCO: Dell Inc., the world's largest PC maker, on Thursday said quarterly profit rose a better-than-expected 52 percent as it increased sales outside the United States, but its shares dipped after it forecast slower revenue growth than Wall Street targeted.

"The guidance for the April quarter is disappointing," said Cindy Shaw, an analyst at Moors & Cabot Capital Markets who, like 10 other analysts that follow the company, has a "hold" rating on the stock. "It suggests that revenue growth will slow further."

Shares declined 0.8 percent in late-afternoon extended trade following an initial rally after results were announced.

Dell said net income rose to $1.01 billion, or 43 cents per share, from $667 million, or 26 cents per share, a year earlier.

Revenue rose 12.8 percent to $15.2 billion from $13.5 billion. Dell's fiscal fourth quarter had 14 weeks, one more week than the typical 13, adding a greater-than-expected 2 percentage points to 3 points to revenue growth, Chief executive Kevin Rollins said on a conference call with journalists.

Dell reported adjusted earnings per share of 43 cents, two cents ahead of the analysts consensus. Wall Street expected revenue of $14.8 billion, according to Reuters Estimates.

"A lot of the higher-margin products are doing well," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

Rollins has been trying to stem a slide in revenue growth after Dell lowered prices on entry-level consumer computers last year and twice missed analysts' revenue forecasts.

Record sales outside the US



Dell increased its percentage of international revenue by 10 percentage points year-to-year, to a record 43 percent of total fiscal fourth-quarter revenue from 33 percent in the same quarter a year ago. Non-U.S sales rose 3 percentage points from the previous quarter.

Sales to businesses, which account for about 85 percent of Dell's revenue, grew 21 percent, including a 41 percent surge in revenue from data storage products, Dell said.

Concerns about growth have held back Dell's shares, which trade at about 18 times estimated fiscal 2007 earnings per share, the same as No. 2 PC maker Hewlett-Packard Co. for its fiscal 2006.

The multiple is a discount when considering that Dell's estimated long-term growth rate is about twice that of its smaller rival, according to Sanford C. Bernstein analyst Toni Sacconaghi.

Shares of Dell, based in Round Rock, Texas, fell 27 cents to $31.69 in after-hours trading following the earnings report.

Dell forecast per-share earnings for its fiscal first quarter ending in April of 39 cents to 41 cents before items, compared with analysts' average estimate of 42 cents.

The company sees revenue at $14.2 billion to $14.6 billion, or year-over-year growth of about 6 percent to 9 percent, while analysts were forecasting $14.7 billion, according to Reuters Estimates.

Dell has been retooling its consumer division, which accounts for 15 percent of revenue, to focus on higher-end products such as the XPS series launched in September to appeal to gamers and tech-enthusiasts.

The company in January announced a supercharged gaming computer, the Renegade, to target the 20 percent of PC users who play video games on their computers. It also launched a 50-inch plasma television as it expands further in consumer electronics.

Dell remained the world's top seller of PCs in the fourth quarter, with 17.2 percent of the market, followed by Hewlett-Packard Co. with 15.7 percent and China's Lenovo Group Ltd. with 7.2 percent. In the United States, Dell claims one-third of the market for personal computers.

(Additional reporting by Eric Auchard in San Francisco and Caroline Valetkevitch in New York)