Dell 2Q beats estimates |
No. 2 PC maker posts 47-percent rise in profits as Net sales soar
August 17, 1999: 4:48 p.m. ET
NEW YORK (CNNfn) - Dell Computer Corp. Tuesday reported a 47-percent jump in fiscal second-quarter profits, topping Wall Street estimates as sales over the Internet continue to soar at the No. 2 maker of personal computers.
The Round Rock, Texas-based company earned $507 million, or 19 cents a share for the three months ended July 30. Analysts polled by First Call expected Dell (DELL) to earn 17 cents a share in the quarter. Revenue surged 42 percent to $6.1 billion.
Dell easily outperformed its year-ago results, when it logged a profit of $346 million, or 12 cents a share, on $4.3 billion in revenue.
Cheers from the Street
Dell shares slipped 5/16 to close at 41-1/8 prior to the earnings announcement. In after-hours trade, Dell shares rebounded and were trading at 43-1/8.
Dan Niles, technology analyst at BancBoston Robertson Stephens, said Dell's stock should climb "$3 or $4 easily" in Wednesday trade.
"This is exactly what we were looking for," said Niles, who recently upgraded Dell to "long-term attractive and set a price target of $48 on the company's stock. "Unit growth was stronger year over year, gross margins were sequentially higher. Overall, this was a great quarter."
The leading direct seller of PCs said sales over the Internet reached $30 million a day in the quarter, representing nearly 40 percent of its total revenue.
Dell said shipments of personal computers increased 55 percent, two times analyst estimates of total industry growth.
"We are now the largest direct company within the worldwide home and small-business market, and are significantly more profitable in that space than our nearest direct competitor," said Michael Dell, chairman and chief executive officer. "Our U.S. consumer shipments grew more than 100 percent in the quarter, and about one-half of those sales were generated online, through www.dell.com."
Gross margins rose slightly from first-quarter levels, 22 percent from 21.5 percent, even as the average revenue per PC unit declined to $2,200 from $2,300.
Niles attributed Dell's gross margin growth to continued falling prices of such components as disk drives and memory chips, as well as better mix of computer products sold by the company.
"Server prices are coming down, but the margins on servers are still much better than the margins on desktops," Niles said.
Desktop PC sales represented 60 percent of Dell's system revenues, compared with 61 percent in the first quarter and 66 percent in the year-ago period.
For the first half of fiscal 2000, Dell earned $941 million, or 34 cents a share, on $11.7 billion in revenue, compared with a first-half 1999 profit of $650 million, or 23 cents a share, on $8.3 billion in revenue.