NEW YORK (CNN/Money) -
Dell Computer reported an earnings increase of 31 percent and sales growth of 18 percent in its fiscal first quarter, meeting analysts' expectations. But sales guidance for the second quarter was a hair below the Wall Street consensus estimate.
| 
| |
|
|
|
|
|
 Michael Dell, chairman and president of Dell Computer, talks about his company's profits, possible name change and outlook for the future.
|
|
Play video
(QuickTime, Real or Windows Media)
|
|
|
|
|
|
The number one manufacturer of personal computers posted net income of $598 million, or 23 cents a share, up from 17 cents a shares a year ago. Revenues were $9.5 billion, compared with sales of $8.1 billion in last year's first quarter.
Dell has thrived despite a weak corporate tech spending environment due to market share gains and cost cutting. The stock is up more than 20 percent year-to-date. Shares of Dell (DELL: Research, Estimates) fell 7 cents, or about 0.2 percent, to $32.18 in regular trading on Thursday. The stock fell further in after-hours trading, dipping 1.9 percent to $31.68 according to Island ECN.
The low end of Dell's revenue guidance for the fiscal second quarter was slightly below Wall Street's consensus. The company said it expected revenues of "more than $9.7 billion" for the quarter. Analysts are forecasting sales of $9.8 billion. Earnings guidance of 24 cents a share is in line with Wall Street's consensus.
It appears that Dell may be a victim of its own success. If its sales for the second quarter come in at only $9.7 billion, that still would be 15 percent higher than a year ago. But investors' hopes for stronger results by Dell and many other techs for that matter have increased during the past two months as the war in Iraq dies down.
"If you go back to this time last quarter, expectations were low. This quarter, expectations are a lot higher," said Robert Cihra, an analyst with Fulcrum Global Partners.
During a conference call with the media, Dell CFO Jim Schneider said that although the company was not seeing an imminent recovery in IT spending, the market had stabilized. This echoed comments made by IBM CEO Samuel Palmisano to analysts and investors on Wednesday.
It shouldn't come as a huge surprise that Dell did not boost its guidance significantly, however. Few tech companies have reported seeing an uptick in corporate demand for tech just yet.
"In the first half of this year, we've seen nothing in terms of IT spending. Budgets have been cut and CIOs are still sitting on their hands," said Michelle Gutierrez, an analyst with Soundview Technology Group. Gutierrez added that estimates for Dell could wind up being too low if there is a pickup in IT spending.
Looking more closely at the first quarter results, Dell continued to show strength in its enterprise business, which includes sales of servers and storage equipment. Revenue from this division increased 26 percent from a year ago, led by a 65 percent gain in sales from storage systems.
Dell also saw solid gains in its notebook shipments, helped by sales of new laptops using Intel's Centrino wireless chip technology. Sales from its notebook and enterprise divisions accounted for 47 percent of total sales, up from 46 percent a year ago. Analysts are hoping that Dell continues to focus more on these areas in the future as the desktop PC market matures.
"Not only is Dell growing and taking share but Dell is growing in the right places -- notebooks, servers and storage, which have higher prices and higher margins," said Cihra. To that end, Dell's net margins in the first quarter were 6.3 percent, up from 5.7 percent a year ago.
| More about tech
|
|
|
|
|
|
Dell is also expanding its presence in the printer and personal digital assistant markets, taking an even closer aim at its rival, Hewlett-Packard. The company did not give specific sales data for these two businesses but Gabriel Lowy, an analyst with Blaylock & Partners said that these two areas should become a meaningful part of Dell's sales within the next four to six quarters. Furthermore, he said H-P should be concerned.
"H-P is probably quite worried, not just about PCs and servers but what Dell will do in printers, particularly in cartridges," said Lowy.
The printers and imaging business is a cash cow for H-P, which lost money in its enterprise division and eked out a tiny profit in its PC business in its fiscal first quarter. HP will report its fiscal second quarter results on Tuesday, May 20.
Analysts cited in this story do not own shares in Dell and their firms do not do investment banking for the company.
|
