Dell Maintains Momentum with Strong Quarter

Computer maker Dell continued its strong recent performance, recording a 31 percent increase in profitability powered by sales growth in certain product lines and in overseas markets.

Dell said revenue rose 18 percent for the three months ending April in its first quarter to US$9.5 billion, clearing the way for income growth of 31 percent to $598 million.

Ironically, Dell’s recent success had led to increased expectations, including some hopes the Round Rock, Texas-based company would soundly beat expectations. That, and the fact that Dell forecast that revenue would remain basically the same in the current quarter, helped drive down Dell shares. In early trading Friday, shares of Dell were down 3 percent to $31.29.

Impressive to a Point

Still, analysts said Dell continues to pace the computer industry, managing to maintain PC sales growth at a time when overall market growth has slowed and continuing to make solid inroads with enterprises.

“With the overall market weak, Dell’s model starts to stand out more and more,” IDC analyst Roger Kay told the E-Commerce Times. “Theyre able to keep costs down for their customers without denting the bottom line.”

Dell can leverage its low-cost, streamlined direct sales model to attract enterprise customers trying to squeeze every bit of value out of their information technology purchases, Kay added.

Proof of that approach came in Dell’s server line, which saw sales growth of 40 percent worldwide, far above growth levels of its competitors. Dell claimed to have accounted for nearly one-third of all servers sales in the U.S. during the quarter and also said that revenue from external storage sales soared 65 percent.

CEO Michael Dell said enterprises have been swayed by Dell’s promises of integrated, lower-priced computer systems. “They’re recognizing the performance and reliability of standards-based enterprise computing, and choosing such servers and storage products at an accelerating rate,” he said in a statement.

Over There

While Dell’s overall profit rose by nearly a third, operational income was actually double 2002 levels in some parts of the world, the company said.

Dell said it leaped into the number two sales position in France thanks to 38 percent growth in units sold. Unit growth was 35 percent across the channel in the UK.

The quarter saw China grow to become Dell’s fourth-largest market, with product shipments up 67 percent and server sales there doubling. In the overall Asia-Pacific market, sales of co-branded EMC storage products rocketed up 90 percent.

Rolling On

Looking ahead, Dell predicted more of the same for its second fiscal quarter, saying revenue would rise 15 percent over 2002 levels, to $9.7 billion.

Dell said it expected units shipped to rise 25 percent over last year, a level that it noted would far outpace industry forecasts for single-digit expansion.