Dell Computer Corp. (DELL), the No. 2 personal computer maker, on Thursday announced slightly lower first-quarter earnings due to weak demand for technology, but topped Wall Street expectations and said it would build on market share gains in the second quarter. 

The company said the first quarter came in above the guidance it had given analysts last month because of market share gains and higher average selling prices as it sold more of its pricier PCs, like notebook computers. 

Dell, which has used its direct business model to cut into sales at its competitors, guided earnings and revenue forecasts higher for the second quarter and said it expects to continue to gain market share, although it expects industry shipments to decline by about 5 percent. 

Round Rock, Texas-based Dell, which lost its spot as the No. 1 personal computer maker after Hewlett-Packard Co. bought Compaq Computer Corp. earlier this month, said it hasn't seen a rebound in technology spending although demand has stabilized. 

"As far as tech spending goes, we have pretty much held to a belief that we thought that the year might have some pick-up at the back-end. I don't know that we have any data that would say yay or nay on that perspective, so I think that we are still expecting some pick up at the end of the year," Dell President Kevin Rollins told reporters. 

"So far, we are not suggesting today that we've seen anything that would give us any reason to up our estimate or up our confidence level on that," Rollins said. 

Dell said first-quarter net income fell to $457 million, or 17 cents per share, compared with $462 million, or 17 cents per share in the year-earlier quarter. Revenues rose slightly to $8.07 billion from $8.03 billion. 

Analysts' average estimate for earnings was 16 cents a share and revenue of $7.8 billion, according to Thomson Financial/First Call. 

Dell also committed to keeping costs low, saying it will reduce costs by more than $1 billion in fiscal 2003. It will cut costs in product design, manufacturing and distribution, operating expenses and warranty costs, the company said. 

Shares of Dell rose to $28.27 in after-hours trade, after having risen 15 cents, or 0.5 percent, to $27.85 on the Nasdaq market ahead of the results. 

"What stands out here with Dell is that until about a month ago...you had IBM as the paragon of stability, and now it turns out maybe it is Dell," said JP Morgan analyst Daniel Kunstler. 

IBM Corp. ,the world's largest computer maker, missed its first-quarter earnings estimates by more than 30 percent, the first shortfall in about a decade. Its stock has fallen about 30 percent this year. 

Dell's loss of its spot as the No. 1 PC maker to HP could force the company to push hard for the market share gains and cost cuts it talks about, said Barry Jaruzelski, a managing partner for Booz Allen Hamilton's global technology practice in New York. "I think it's going to be kind of a red flag in front of a bull, that they are going to be hell bent to become No. 1 again. They are going to push the economic advantages of their model to the absolute limit," Jaruzelski said. 

Dell said it expects second-quarter earnings of 18 cents per share and that revenues will increase 8 percent from the year-earlier quarter to $8.2 billion. Analyst estimates were for second-quarter earnings of 17 cents per share on revenue of $8.02 billion. 

In addition to PCs, Dell sells computer servers, networking switches and as of this week, digital projectors. Dell said that server sales and notebook sales were strong during the quarter, 

At the beginning of 2002, the company began reselling data storage machines made by EMC Corp. and is considering taking on production of some less pricey storage systems. 

Michael Dell, the company's founder and chief executive officer, has said that Dell benefited during the quarter from the confusion surrounding the merger of HP and Compaq, as some customers uncertain about which products would be around after the merger switched to Dell. 

Dell shares have gained 3 percent so far this year while the American Stock Exchange Computer Hardware Index has lost 7 percent.