DALLAS – Dell Inc. (DELL) set a record for sales and topped Wall Street's earnings expectations in the fourth quarter, but the personal computer juggernaut indicated that revenue for early 2005 could fall short of analysts' predictions, and its shares fell 4.6 percent.
"It's a stock that has expectations of perfection, and there were a couple areas that could be seen as variances to that," said Richard Chu, an analyst with SG Cowen, who judged the quarter overall to be another good one for Dell.
However, Dell's profit fell due to a tax charge. Dell said late Thursday that it earned $667 million or 26 cents per share in the quarter ended Jan. 28, compared to $749 million or 29 cents per share a year earlier.
The results included a charge of 11 cents per share because Dell expects to pay 5.25 percent U.S. taxes on $4.1 billion earned overseas. Dell plans to bring the profits home under a law passed by Congress last year.
Without the charge, Dell would have earned 37 cents per share. On that basis, analysts had expected Round Rock-based Dell to earn 36 cents a share, according to Thomson First Call. Dell added that it expects to earn 37 cents per share in the first quarter, a penny better than analysts were forecasting.
Fourth-quarter revenue rose 17 percent to $13.46 billion from $11.51 billion a year earlier.
However, sales fell short of the $13.54 predicted by analysts, and the company's projected first-quarter revenue of $13.4 billion was below the analysts' estimate of $13.5 billion.
Dell shares sank $1.92, to $39.65 in morning trading Friday on the Nasdaq Stock Market.
Dell's consumer business also grew a relatively restrained 10 percent, as PC sales lacked the explosive growth of late 2003. In addition, chief executive Kevin Rollins said Dell "probably could have grown a little faster" in Asia and the U.S. non-consumer market — businesses, government and schools — but didn't want to sacrifice profit margins.
In the PC market, Dell has solidified its industry-leading position while International Business Machines Corp. (IBM) sold its PC business for $1.75 billion and Hewlett-Packard Co. (HPQ) failed to reap quick dividends by acquiring PC maker Compaq.
Dell has also expanded into servers, data-storage gear, printers, consumer electronics and technology services.
For several years, Dell has set a goal of hitting $60 billion in annual revenue. After just missing $50 billion in the year just ended, the company has raised its goal to becoming an $80 billion company. Rollins didn't set a timetable.
Rollins said the company is still deciding what to do with the $4.1 billion in foreign earnings that it plans to bring home. Congress last year approved a one-time tax break under which companies that repatriate foreign earnings will have that profit taxed at 5.25 percent instead of the usual 35 percent on income earned in the United States.
Rollins said the company might spend the money on research and development, marketing or new facilities.
For its full fiscal year, Dell earned $3.04 billion, or $1.18 per share, compared with $2.65 billion, or $1.01 per share, in 2003. Revenue rose to $49.21 billion from $41.44 billion.