NEW YORK – No. 1 personal computer maker Dell Computer Corp. (DELL) on Wednesday said its earnings were on track and that its current-quarter revenue may be slightly higher than it had expected after winning new business by keeping prices low.
"Supply costs have flattened somewhat, but our competitive advantage has not. We've stepped up our pursuit of internal cost reductions through still-higher levels of quality and efficiency," Chief Operating Officer Kevin Rollins said in a statement.
Dell stock rose to $26.70 in after-hours activity, after losing 38 cents, or 1.4 percent, in regular Nasdaq trading to end at $26.19.
Rollins said Dell was benefiting despite "industry softness and change." Corporate technology spending has been under pressure amid a general economic downturn.
The Round Rock, Texas-based company rose to the top of the personal computer industry in 2001 by using its direct-to-customers sales model to drop prices and take market share from competitors like Compaq Computer Corp. (CPQ), Hewlett-Packard Co. (HWP) and Gateway Inc. (GTW).
Dell may soon be facing a larger rival if HP and Compaq complete a merger that would be the largest technology deal ever. HP is waiting for a final tally to see how its shareholders voted and is also fighting a court battle with HP dissident board member Walter Hewlett.
REVENUE SEEN SLIPPING FROM Q4
Dell said that it sees fiscal first-quarter revenue at about $7.9 billion, down 2 percent from the fourth quarter. It also said it is maintaining its expectations for earnings per share of 16 cents in its fiscal first quarter ending in May.
Analysts were expecting the company to book earnings of 16 cents per share on revenue of $7.7 billion, according to research firm Thomson Financial/First Call.
In February, Dell said it expected its first-quarter revenue to decline by 3 percent to 5 percent from the fourth quarter's $8.7 billion.
"The news coming out of Dell is pretty good. Where I see the positive surprise is that they bumped up their forecast for the first quarter," said Tim Woolston, a portfolio manager for Boston Advisors Inc. who holds a small stake in Dell and follows the PC industry closely.
"That hints of a turn in the PC industry," Woolston said. But, he said, Dell's extra revenue may have come from market share gains against competitors.
Dell issued the guidance ahead of a meeting with analysts Thursday morning in New York. The meeting will include presentations by Rollins, Chief Executive Michael Dell and Chief Financial Officer James Schneider.
During the meeting, the executives are expected to discuss Dell's strategy for increasing its share of the corporate market for computer servers, services and data storage.
In particular, Dell is expected to touch on the company's acquisition strategy for services. While Dell has focused on internal growth in the past, Michael Dell said recently that he is considering acquisitions in the services area.
Rollins on Wednesday, however, threw cold water on an analyst report suggesting the company was working on a deal with printer company Lexmark International Inc. (LXK), saying that Dell is talking to lots of printer companies. Dell resells Lexmark, Epson and even HP printers.
DELL LAUNCHES BLADE SERVERS
The news came hours after Dell on Wednesday held a press conference to launch a new server computer line in a bid to increase sales to the large corporations that have already embraced its low-cost PCs.
Dell said it would begin shipping in the third quarter "blade" computer servers, which are made of small tissue-box-sized computing modules that mare easy to set up and take apart.
A traditional Dell server is based on components the size of a pizza box that aren't quite as flexible as a blade but which have more computing power. Competitors, including HP and Compaq, began shipping "blade" servers earlier this year.
Dell also said that it would begin selling by the end of the year a second type of modular computer server, called a "brick" server, that is similar to a blade server but will have more computing power.
A Compaq executive says the company has sold more than 3,000 blade computers since launching them in January.
"Interestingly enough if you look back a year, the perspective on the blade market was very heavily weighted toward dot-coms and ISPs (Internet service providers), but we're seeing very good take-up in traditional corporate accounts as well as the high-performance technical computing marketplace," said Paul Miller, director of product marketing in Compaq's industry standard server group.