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Dell logs on to 24 per cent leap in profits

Posted on: Friday, 13 February 2004, 06:00 CST

DELL, the world's second-largest personal computer maker, has reported a 24 per cent jump in fourth-quarter profits following strong corporate and consumer sales over the Christmas period.

The Texas-based company said sales rose 18 per cent in the three months to January 30 as demand from business customers accelerated from the gradual improvement seen in recent quarters.

Chief executive Michael Dell said: "Business is growing. The signs are getting relatively healthy and we're seeing a lot of increased demand from customers to refresh their older installed base of products."

Dell, which has a low-cost supply and distribution system and sells directly to customers to keep prices low and undercut its competitors, said demand has been strong in its new consumer electronics markets such as TVs and digital music players.

Net profits for the fourth quarter rose to GBP 395 million, up from GBP 318m for the same period last year. Revenues increased to GBP 6 billion, from GBP 5.1bn last time.

The company, which said it expects steady growth in technology spending this year, forecast first-quarter revenues of GBP 5.9bn, in line with analysts' expectations.

Technology analyst Eric Rothdeutsch said Dell's comments on spending by customers were some of the most positive the company has ever made.

"Where in the last few quarters their growth primarily came from share gains, now they are seeing a fundamental growth in units," Mr Rothdeutsch said.

Investors had expected worse figures from Dell following disappointing forecasts from chip maker Intel and internet equipment maker Cisco Systems.

But there were still some investors who had expected an even better performance. Marty Shagrin, an analyst at Victory Capital Management, said: "There will be a set of investors who would have liked to see a little more upside and guidance taken higher."

Dell said prices of components - such as computer memory and display screens - which have been declining at a rate slower than historic levels, started to become more favourable to the group during the quarter.

Falling prices of component parts are an element of Dell's cost advantage because it is able to pass them on to its customers immediately as it builds computers to order.

Shipments of its computer servers, which are among the most profitable of Dell's products, jumped 40 per cent compared with the fourth quarter a year ago, and storage revenues climbed 47 per cent.

Dell said shipments of its notebook PCs rose 40 per cent, ahead of the industry average, while shipments of desktop PCs climbed 21 per cent.

After a year of explosive growth in China, Dell said it hoped to grow at least three times the market's overall growth rate this year.

Bill Amelio, president of Dell's Asia Pacific region, said the group might be able to increase its current share of the massive Chinese market - which stood at 6.8 per cent last year - into double digits.

China outperformed Japan last year to become the world's second- largest PC market.

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