Dell Says 1Q Profits Rose 22% On Record Sales - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Business & Finance

Dell Says 1Q Profits Rose 22% On Record Sales

The PC maker reported $731 million in earnings for the quarter, but also said its inventories and component costs were higher.

DALLAS (AP) -- Personal computer maker Dell Inc. said Thursday its first-quarter profits rose 22 percent on record sales, but the personal computer giant reported rising inventory levels and higher costs for components.

Dell said it earned $731 million, or 28 cents per share, in the three months ended April 30 compared with $598 million, or 23 cents per share, a year earlier.

That matched the forecast of analysts surveyed by Thomson First Call and Dell's own prediction from last month, when the company said overseas sales were stronger than expected.

Revenue rose to $11.54 billion from $9.53 billion a year ago. That beat the company's own forecast of $11.4 billion issued last month.

The company said it expected to earn 29 cents per share in the May-July period and it forecast second-quarter revenue to climb to $11.7 billion, up 20 percent from the same time last year.

Dell, which has expanded into servers, data-storage equipment, and other lines, said it expected to earn 29 cents per share in the May-July period and it forecast second-quarter revenue to climb to $11.7 billion, up 20 percent from the same time last year.

Before release of the report, Dell shares fell 65 cents, or 1.8 percent, to $35.80 in trading on the Nasdaq Stock Market. In extended trading, the shares lost another $1.06.

After-hours traders may have been reacting to Dell's comments about inventory and component prices.

Kevin B. Rollins, who has been named to replace Michael S. Dell as chief executive in July, said Dell would face rising costs for components and would increase cost-cutting efforts.

Dell had hoped that the cost of DRAM--dynamic random access memory--chips used in computers would ease early this year, but that didn't happen. The increases translated to more than $10 per computer, most of which Dell couldn't pass on to consumers, officials said.

"It hit us a bit," Rollins said.

Meanwhile, the average price for products sold slipped to $1,570, down $50 per unit from a year ago. The combined cost and price trends caused Dell's gross profit margin to slip to 18 percent from 18.3 percent a year ago.

"It's all about margins," said Brent Bracelin, an analyst with Pacific Crest Securities. "It's their lowest operating margin in six quarters when the economy is supposed to be getting better."

Analysts said PC price competition--especially for corporate customers--and a new emphasis on lower-profit peripherals helped squeeze Dell's margins.

"Even Dell showed some effects from the price wars we've seen in the last six months," said Barry Jaruzelski, a technology consultant for Booz Allen Hamilton.

Following similar results at other technology companies such as Cisco Systems Inc., Dell also reported rising inventories, which jumped to $425 million from $264 million a year ago.

"It's up higher than I'd like it to be," said chief financial officer James M. Schneider.

Schneider said the figure represented four days of inventory instead of the company's standard three days' worth, "so I wouldn't consider this to be a problem area."

The weak dollar helped boost Dell's shares in Europe and Asia. The company said overseas revenue increased 29 percent, and Rollins said the company would continue to focus on sales outside the United States.

Round Rock-based Dell said it hired 1,800 people in the February-April period and has 47,800 employees. The company didn't provide figures but said about half the hiring was outside the United States.

Dell said it spent $1.1 billion to buy back its own stock in February-April period, and Schneider said the company planned to spend another $700 million on its stock in the second quarter. The company said it ended April with $11.9 billion in cash and investments.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
The State of Cloud Computing - Fall 2020
The State of Cloud Computing - Fall 2020
Download this report to compare how cloud usage and spending patterns have changed in 2020, and how respondents think they'll evolve over the next two years.
Top 10 Data and Analytics Trends for 2021
Jessica Davis, Senior Editor, Enterprise Apps,  11/13/2020
Where Cloud Spending Might Grow in 2021 and Post-Pandemic
Joao-Pierre S. Ruth, Senior Writer,  11/19/2020
The Ever-Expanding List of C-Level Technology Positions
Cynthia Harvey, Freelance Journalist, InformationWeek,  11/10/2020
Register for InformationWeek Newsletters
Current Issue
Why Chatbots Are So Popular Right Now
In this IT Trend Report, you will learn more about why chatbots are gaining traction within businesses, particularly while a pandemic is impacting the world.
White Papers
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Sponsored Video
Flash Poll