Dell profits rise, stock slips

NEW YORK: Dell, which knocked rival Hewlett-Packard Co. to the No. 2 PC maker spot during the first calendar quarter, said it expects fiscal second-quarter revenue to rise 15 percent from a year ago to more than $9.7 billion and earnings of 24 cents per share compared with a year ago's 19 cents.

Analysts said that the Round Rock, Texas-based company needed to indicate faster growth than that to justify the recent rise in its stock to levels not seen in more than two and one-half years.

"As excellent as the results were across the board, there was no meaningful upside in the any of the categories, nor was there upside in the guidance," said Richard Chu, an analyst at SG Cowen. He has an "outperform" rating on the stock and hasn't done any investment banking for Dell.

Dell has diversified its business away from PCs to include computer servers and data storage. It has also broken into the printer market, the networking market and sells handheld computers. This summer, it will ask shareholders to change its name from Dell Computer to Dell to reflect that change.

Dell shares, which have gained 11 percent in May, fell to $31.53 in extended trade, down from $32.18 at the close. Dell said its net profit in its first fiscal quarter of 2004 rose to $598 million, or 23 cents per share, from a year earlier's $457 million, or 17 cents.

It said revenue rose to $9.53 billion from $8.07 billion in the first quarter of fiscal 2003.

Dell also said it sees shipments of its computers rising 25 percent in the second quarter compared with a year earlier.

Addressing a press gathering, Dell CFO Jim Schneider said the technology market had stabilized but that there were no signs of a recovery. "While overall industry demand has increased slightly for the past three quarters, we don't expect significant near-term improvement in economic or industry conditions," Schneider said.

He added that the company plans to make up for the lack of industry growth by gaining market share over its rivals. Dell has gained market share from HP, IBM and Gateway Inc. by selling products directly to its customers, which keeps costs low and allows it to make aggressive price cuts.

Dell said that shipments of personal computers rose 29 percent and shipments of computer servers rose 40 percent in the quarter. The company said that revenue from external data storage machines systems rose 65 percent. Dell entered the computer printer market during the quarter and said that it sold twice as many printers as it expected.

It will introduce a second wave of printers in the next couple of months but said it would take a few years for it to be a significant business. Dell said that in China, a fast growing market where it hopes it can build market share, shipments rose 67 percent and computer server shipments doubled.

© Reuters