Dell Profit Drops as Prices Fall Amid PC Price War

Dell Computer Corp. reported sharply lower third quarter profits Thursday, as the No. 1 maker of personal computers lead a price war and won market share from its rivals.

Dell said it would continue to gain market share in the fourth quarter as its revenues rise slightly over the third quarter but industry-wide revenues fall.

The Round Rock, Texas-based company reported net income of $429 million, or 16 cents per share, compared with net income of $674 million, or 25 cents per share, in the same period a year ago.

Analysts polled by Thomson Financial/First Call hastory," Dell said in a statement.

Third-quarter sales were $7.5 billion, within the range the company had targeted in August when it told analysts to expect revenues that would be flat to down 5 percent from the second quarter's $7.6 billion.

Dell said sales to government customers were strong. Consumer sales were also higher, Dell said, as the company gained share from its competitors, including Compaq Computer Corp. and Hewlett-Packard Co. , which plan to merge, and Gateway Inc. .

Computer makers have been caught in a downdraft of demand that worsened after the Sept. 11 terror attacks. Dell, however, said that demand had recovered for its products relatively quickly after the attacks.

Research firm IDC said last month that Dell grabbed more U.S. market share during the third quarter, with about 27 percent of the market. Overall PC sales, however, declined about 14 percent during the quarter, the Framingham, Massachusetts, research firm said.

On average, analysts expected sales of $7.3 billion, according to Thomson Financial/First Call.

Dell shares have risen about 59 percent this year while the American Stock Exchange Hardware Index has lost 28 percent. Dell ended slightly higher in Thursday trading on the New York Stock Exchange ahead of the earnings announcement, closing at $27.69.