Dell reports slight dip in Q1 net income

Dell Computer Thursday reported a slight decline in net income for its first fiscal quarter, but managed to inch ahead of expectations thanks in part to what it called strong sales of its servers, workstations and storage gear to corporate customers. [Note to editors: New information appears in bold.]Net earnings for the three months ended May 3 were US$457 million, or $0.17 per share, on revenue of $8.1 billion, the company said in a statement. That compares to earnings of $462 million, or $0.17 a share, a year ago, when revenue was $8.0 billion.

Shipments of industry-standard servers, workstations and storage gear climbed 16 percent during the quarter, the Round Rock, Texas, computer maker said.

Analysts had been looking for earnings of $0.16 a share on revenue of $7.86 billion, according to First Call/Thomson Financial. Those estimates were shaped by financial guidance provided by Dell in April, when it boosted its revenue projection based on solid sales in the first two months of the quarter.

The company said Thursday it had boosted its share of both the U.S. and worldwide server markets in the quarter, and said its share of the U.S. server market by unit shipments reached 30 percent for the first time.

Dell is working hard to cut operating expenses and hopes to save $1 billion in fiscal 2003 through improved efficiencies, Kevin Rollins, Dell's president and chief operating officer, said in a conference call after the results. The main target areas for the cost-cutting are product design, manufacturing and distribution, operating expenses and warranty costs, it said in the statement.

Looking ahead, second-quarter hardware shipments for the industry as a whole are likely to be off by 5 percent from the first quarter, in line with seasonal trends, and revenue is likely to fall at a greater rate, the company said. Despite that, Dell's second-quarter revenue could be up as much as 8 percent from a year ago, to $8.2 billion, with earnings per share of about $0.18, or a penny ahead of current analyst predictions, the company said.

Its solid financial performance is being driven by gains in market share and improvements to its own operating efficiencies, rather than by any significant uptick in IT industry sales as a whole, according to Rollins.

"There is some firming in the U.S. market but not enough yet that we're signalling an uptick," he said. He added later: "I don't think we're quite at the point where we're suggesting there's been a turnaround."

Dell said its results also reflect a growing preference among customers for the type of industry-standard servers and other hardware it supplies, much of which runs on Intel Corp. microprocessors. It said shipments of its PowerEdge servers increased 10 percent from a year earlier.

By region, Dell's unit shipments grew 17 percent from a year earlier in the U.S., where revenue increased by 3 percent. In Asia-Pacific and Japan, product shipments climbed 8 percent, while in Europe, the Middle East and Africa they grew 5 percent, the company said. It highlighted Germany as a particular strong point, where shipments climbed 19 percent.

The company's objectives are "simple and unchanged," Rollins said in prepared remarks. They are to further reduce costs, to deliver value to customers -- particularly enterprise customers -- and to profitably gain market share.

"We're continuing to make good on all three commitments," he said.

Before the results were announced Thursday, Dell's shares on the Nasdaq (DELL) closed up almost half a percent on the day, at $27.85.