Dell's results show it will close in on HP

Dell Computer, which lost its No. 1 ranking in the PC industry to

Hewlett-Packard last week following its merger with Compaq announced that its

first quarter profits had fallen. But in an ominous sign for HP, Dell's sales

rose at a time when HP and other competitors are seeing steep declines.

Dell earned $457 million compared with $462 million a year ago. Revenues rose

slightly to $8.07 billion from $8.03 billion. HP's computer business, in

comparison lost some $200 million and experienced a 20 per cent sales decline.

Dell said the results were better than had been expected earlier because of

market share gains against HP and others and due to higher average selling

prices as Dell sold more of its pricier notebook and workstation PCs.

Dell president Kevin Rollins predicted that Dell's marketshare will continue

to increase and overtake HP. Overall sales could shrink by 5 per cent this year,

Dell said. "As far as tech spending goes, we have pretty much held to a

belief that the year might have some pick-up at the back-end. I don't know if we

have any data that would say yes or no on that perspective, so I think that we

are still expecting some pick up at the end of the year. So far, we are not

suggesting today that we've seen anything that would give us any reason to up

our estimate or up our confidence level on that."

Industry analysts said losing the top spot means a lot to Dell which will be

very motivated to cut costs and market heavily to regain the position from HP.

''It's like waiving a red flag in front of a bull. They are going to be

hell-bent on becoming No. 1 again. They are going to push the economic

advantages of their model to the absolute limit,'' said analyst Barry Jaruzelski.