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Dell's 4Q profit in line
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February 14, 2002: 6:18 p.m. ET
Computer maker hits profit mark and affirms its current target.
By Staff Writer Richard Richtmyer
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NEW YORK (CNN/Money) - Dell Computer Corp. on Thursday reported a fiscal fourth-quarter profit that fell from the same period a year earlier but was in line with recently raised expectations.
The company also affirmed Wall Street's current financial expectations for the current quarter.
After the closing bell, Dell (DELL: Research, Estimates) said it earned 17 cents per share on $8.1 billion in revenue during the quarter ended Feb. 1. That's down from 18 cents per share but is in line with expectations executives set last month.
At $8.1 billion, Dell's fourth-quarter revenue fell 6.8 percent from $8.6 billion in the year-ago period but rose from the third-quarter's $7.5 billion.
Executives also said they expect to report a profit of 16 cents per share in the first quarter as its unit shipments decline 3-to-5 percent from the fourth quarter's level. Computer sales typically decline in the first quarter following the seasonally strong holiday season, and most analysts had been expecting the company's profit to be about 16 cents per share in the current quarter.
On Jan. 18, Dell, the world's No. 1 supplier of personal computers, said its expected to log a profit of 17 cents per share on $8 billion in revenue for the quarter. That was slightly better than Wall Street's prior estimate of 16 cents per share on sales of $7.7 billion.
Dell, whose products also include enterprise hardware such as network servers, workstations and data-storage systems, has been something of a standout in the information technology industry over the past year, especially in its core PC business.
Recent industry reports show that year-over-year global PC shipments fell in 2001 for the first time ever, with especially steep declines in the United States. Those same reports showed Dell as the only top-tier vendor to increase shipments on a year-over-year basis both in the United States and globally.
But executives focused on the performance of the company's s non-PC businesses, noting that shipments of enterprise systems grew 12 percent from the same quarter a year ago. The company also said it sold 69 percent more storage capacity during the quarter than in the year-ago quarter.
Overall, enterprise revenue now represents roughly 19 percent of Dell's total revenue, and executives were fairly optimistic about that segment in the current quarter.
"We've seen the business market stabilize, and we're looking for less of a fall-off in this first quarter than we did last year," Jim Schneider, Dell's chief financial officer, said in a teleconference with the media Thursday's evening.
Still, they remained cautious in setting overall expectations for the coming months, saying that while they expect to continue to outperform the broader industry but stressing that a recovery depends largely on the general health of the economy.
"I don't expect that the economy is going to come roaring back in one quarter," said Michael Dell, the company's founder and chairman. "I think it's going to be a very gradual and gentle recovery. And the fact is, we don't have a way of predicting this with any certainty."
He said the company is still "in the mode of providing a one-quarter forecast."
Dude, you sold some PCs!
As for its PC business, Dell said spending on a popular, consumer-focused U.S. television campaign, featuring the character "Steven" whose catch phrase "Dude, you're gettin' a Dell," has paid off.
Dell said shipments to home customers were up 56 percent from the third quarter and were 38 percent better than one year ago.
Dell has been credited as the creator of the build-to-order sales model, under which customers custom order computers directly from the company. That makes for more efficient supply-chain management and lower manufacturing costs.
Analysts recently have been impressed by Dell's efforts to expand its market segment coverage and leverage its business model to keep the pressure on competitors in a difficult market. The company has been the most aggressive in cutting PC prices while remaining profitable.
In the fourth quarter, the average selling price of a Dell computer was $1,700, down from a little more than 2,000 in the same quarter a year earlier.
Dell is the last of the top-tier PC vendors to report its results for the most recent quarter, which included the all-important holiday selling season.
On Wednesday, Hewlett-Packard (HWP: Research, Estimates) logged a fiscal first-quarter profit that topped analysts expectations, citing stronger-than-expected sales of its consumer PCs and imaging systems during the holiday season.
Last month, Compaq (CPQ: Research, Estimates), which has agreed to merge with HP, also logged quarterly results that beat expectations. However, its PC business continued to be a drag on earnings, while the upside came from cost-cutting and a better mix of more profitable products such as servers and IT services.
Some industry observers have suggested that Dell has benefited from the uncertainty surrounding the HP-Compaq merger, an idea that Dell did not dispute.
"It didn't hurt," he said.
He also said the proposed merger, whether or not it ultimately is approved, would have no affect on Dell's business.
"We're prepared to compete with these companies whether they're separate, combined or any combination you can dream of otherwise," he said.
The most recent quarterly results from Gateway (GTW: Research, Estimates), the smallest of the U.S.-based, top-tier PC vendors, also were better than expected.
But at the same time, Gateway, which has lost much of its market share to Dell, told investors to expect losses for the next several quarters as it becomes more aggressive in pricing and marketing its products.
Dell said his company's operating model and recent market share gains give it the upper hand in any future price war.
"Gateway experienced a rather strong year-over-year decline; our cost-structure advantage is quite significant; and our consumer business is not only quite profitable, but growing rapidly," Dell said. "Our advantage there appears to be expanding." 
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