The Telegraph
Since 1st March, 1999
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Dell logs into strong quarter

New York, Nov. 15: Dell Computer reported strong gains in quarterly profits and sales Thursday, matching Wall Street expectations. The company predicted that its strong performance would continue in the current quarter but mainly because of Dell’s ability to take business from rivals rather than any rebound in the computer industry.

Dell reported that its net income rose 31 per cent to $ 561 million, or 21 cents a share, compared with the year-earlier quarter, while sales increased 22 per cent to $ 9.1 billion.

The company’s performance, Dell president Kevin B. Rollins said, was a “pretty stark contrast to the rest of the industry.”

For the industry, worldwide personal computer sales have finally stabilised, inching ahead a grudging few percentage points after a long slump. But Dell stands alone as a major PC maker that is growing briskly.

“It’s becoming boring,” said Charles R. Wolf, an analyst for Needham & Co. “Dell is just killing the competition.”

The company sells its computers directly by telephone and online instead of selling through middlemen and retailers. And Dell has honed the direct business model to a level of low-cost efficiency that its competitors cannot match.

In terms of market share, Dell recently nudged ahead of Hewlett-Packard, whose PC business expanded sharply after it purchased Compaq Computer.

But the Hewlett-Packard PC business continues to lose money, though analysts expect the company’s PC unit to have sharply reduced losses when Hewlett-Packard reports its quarterly results next week.

Dell is preparing to move into new markets by offering Dell-branded hand-helds and printers. An announcement on hand-helds is expected next week, and its devices, using Microsoft’s Pocket PC software, are expected to be aggressively priced at $ 199 and $ 299, according to Todd Kort, an analyst at Gartner Inc.

Those prices include a $ 50 rebate that Dell is offering, at least initially, to stimulate sales. But machines with comparable features, processor speeds and memory now cost up to $ 500.

In 2003, Kort estimates, Dell may well claim 25 per cent of the market for hand-helds running the Pocket PC software, challenging Hewlett-Packard and Toshiba for the lead.

But in conference calls with securities analysts and reporters, Dell executives emphasised that the major opportunity for sharply increasing profits in the near term was in making further inroads into corporate data centres—selling the server computers that power corporate networks, storage systems and network switches.

Its sales of data-serving computers advanced 24 per cent in the quarter ended November 1, nearly five times the rate for the rest of the industry.

For its fourth quarter, Dell executives tentatively said they expected its profits to increase 35 percent from the year-earlier quarter, to 23 cents a share, and its sales to increase 24 per cent to $ 9.7 billion. “It was another solid quarter, with conservative guidance for the fourth quarter,” said Andrew J. Neff, an analyst at Bear, Stearns & Co.

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