Enterprise Sales Help Dell Top Q1 Estimates

SAN FRANCISCO (05/11/2000) - Dell Computer Corp. topped Wall Street expectations today with a strong first-quarter financial performance. The results were buoyed by a 51 percent hike in sales of servers, storage products and workstations, Dell officials said.

Net revenue for the first quarter of fiscal 2001, which ended April 28, 2000, increased 31 percent, to US$7.3 billion, Dell said in a statement issued today.

Net income grew 21 percent to $525 million, or 19 cents per share, compared with $434 million, or 16 cents per share, in the first fiscal quarter of 2000.

Financial analysts had expected Dell to profit by 16 cents a share, according to First Call/Thomson Financial.

Dell's profits were boosted by strong sales of servers, storage products and other equipment used by corporations and service providers to build out the infrastructure of the Internet, James Schneider, the company's chief financial officer, said in a conference call this afternoon with the press.

Along with notebook computer sales, which also increased, the sale of such enterprise computing equipment carries higher margins for Dell than desktops, helping to boost the company's top-line growth. Profits were also lifted by relatively low component costs in the quarter and strong gains from investments, Schneider said.

Notebook sales comprised 30 percent of Dell's total system revenue, up from 23 percent in the same quarter last year. Desktop sales shrank as a proportion of total system sales down to 52 percent from 61 percent for the year-ago quarter, Dell said.

Revenue from services, including integration, hosting and Internet access services, increased 50 percent in the first quarter of fiscal 2001 to more than $500 million worldwide, the company said.

The supply of microprocessors from Intel Corp. will likely continue to be tight through the end of the second fiscal quarter of 2001, but Dell expects to receive enough of the chips to meet its shipment targets, Schneider said.

"We'll be working very closely with Intel throughout the quarter," he said.

Acer Inc., Gateway 2000 Inc. and Dell each reported earlier this year that Intel processors, particularly higher-performance versions, have been in short supply.

A problem reported earlier this week with Intel's 820 chipset didn't affect Dell because the issue arises only when the chipset is used in conjunction with SDRAM (synchronous dynamic random access memory) components, and Dell's PCs use only standard DRAM chips, Schneider said. [See "Intel to Replace Defective 820 Motherboards," May 10.]On a regional basis, Dell is still battling to improve its sales in Europe, which remains a relative weak spot for the company. Revenue in the region grew 17 percent year over year to comprise 22 percent of total revenue, down from 24 percent a year ago.

"Europe's growing a little slower than that of the rest of the world, but fundamentally our slower growth rate and lack of performance there is our problem," Schneider said.

Quarterly revenue in the Americas increased 35 percent to comprise 70 percent of total revenue, helped by strong growth to small and medium-sized business customers in the region. Sales in Asia-Pacific and Japan increased 47 percent year over year to comprise 8 percent of net revenue, up 1 percent from the first quarter of fiscal 2000, the company said.

Dell's results were announced after the close of the U.S. financial markets.

The company's shares on the Nasdaq stock exchange closed today at $44.69, down 25 cents from yesterday's close.

Dell, based in Round Rock, Texas, can be reached at +1-512-338-4400 or via the Internet at http://www.dell.com/.

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