E-Commerce Sales Power Dell’s Solid Quarter

Dell Computer (Nasdaq: DELL) leapt past Wall Street’s expectations after the markets closed on Tuesday, reporting strong e-commerce sales and record earnings for the second quarter of 1999. Net income rose to $507 million (US$), a 47 percent increase over the $346 million reported for the second quarter of 1998. Revenues grew to $6.142 billion, a 42 percent increase over the $4.331 billion reported a year ago. Dell’s earnings per share of 19 cents were two cents better than the consensus estimate of analysts.

E-Commerce A Driving Force

E-commerce revenues were a big reason for Dell’s strong earnings report. In July, Dell’s online sales were $30 million a day, representing nearly 40 percent of the company’s revenue. Dell says its online sales were twice the combined revenue of the other 20 Internet shopping sites, as measured by Media Metrix.

Dell also reported that it moved ahead of Compaq as the top supplier of PCs in the quarter, based on analysts’ estimates for the industry. Dell said sales to individuals and small business were especially strong. Overall, Dell’s product shipments increased 55 percent, twice as much as analysts’ estimates of overall 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 CEO of Dell. “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.”

Y2K’s Effects Are “Diminishing”

Dell Computer also quelled anxiety about problems associated with Y2K, saying that the Year 2000 problem’s effect on computer purchasing “is diminishing” and that overall demand is expanded to be healthy for the rest of the year.

“Based on what customers are telling us, we expect sequential industry growth to follow historical trends, Y2K notwithstanding,” Michael Dell said. “And we’re very optimistic about our ability to grow at a multiple of the industry rate.”

Dell Computer added the second half of the year could be partially boosted by anticipated demand increase from government agencies.

Stock Impact

Shares of Dell, which largely have been a holding pattern during the summer, were up 3-3/8 to 44-1/2 in early trading today. Dell’s price-to-earnings ratio of more than 70 is high for computer manufacturers, but investors may be warming to the stock now that the company is becoming such a significant e-commerce play. In addition to selling hardware on its home page, Dell also operates the Gigabuys online store, which sells hardware, software and computer accessories.