Dell's Juggernaut Rolls On - InformationWeek

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Dell's Juggernaut Rolls On

Net income for the quarter ending July 30 jumped nearly 30% thanks to strong sales of printers and servers,

DALLAS (AP) -- Offering a stark counterpoint to rival Hewlett-Packard Co., Dell Inc. reported a nearly 30 percent jump in net income as strong sales of printers and servers notched double-digit gains in overseas markets.

Dell, the world's largest personal computer maker, said Thursday it earned $799 million, or 31 cents a share, compared with $621 million, or 24 cents a share a year earlier. The results matched forecasts.

Revenue rose to $11.71 billion for the three months ended July 30, up from $9.78 billion a year ago.

For the first six months of its fiscal year, Round Rock, Texas-based Dell earned $1.53 billion, or 59 cents per share, on revenues of $23.24 billion.

Dell's earnings were in stark contrast to HP, which shocked investors with weak results earlier Thursday.

The Palo Alto, Calif. company's 9 percent jump in revenue was overshadowed by earnings of $586 million, or 19 cents per share--well short of the 31 cents per share expected in a Thomson First Call survey of analysts.

"What this points out is the market should not value every technology, should not value the whole sector the same every time," Dell chief executive Kevin B. Rollins said. "To paint the entire industry with one brush would be ill-advised for investors and the media as well."

Rollins predicted Dell would meet analysts' third-quarter estimated earnings of 33 cents a share, with sales of $12.5 billion and a 21 percent gain in shipments.

The company said it based the forecast on expected strong fall sales from seasonal back-to-school purchases and rising technology spending in the corporate and government sectors.

Dell also said it was encouraged by falling prices for components such as memory chips.

Rollins boasted that Dell "is a profoundly different company from others in the industry" because of its direct-sales approach rather than selling through retail outlets.

"We touch the market directly," he said. "We have a very good insight into what the market is doing because we have no middlemen."

In the May-July quarter, Dell shipments to Europe, the Middle East and Africa increased 30 percent while growth in the United States hit 20 percent.

Dell has expanded from PCs into printers, servers, consumer electronics, and technology services. The company expects to sell 5 million printers during its current fiscal year, 1 million more than it initially predicted.

Barry Jaruzelski, management consultant at Booz Allen Hamilton, said Dell's success wasn't a surprise as it continues to grab market share from other companies.

"The Dell steamroller continues," he said. "They continue to be successful at expanding into these categories that favor their volume-product model, whether it be PCs or televisions."

Dell spent $900 million to buy back its own stock in quarter, bringing the total amount of repurchased stock to $2 billion this year. "I think that's going to be the best use of our cash in the near term," Rollins said.

For the first six months of its fiscal year, Round Rock, Texas-based Dell earned $1.53 billion, or 59 cents per share, on revenues of $23.24 billion. A year earlier, the company earned $1.22 billion or 47 cents a share on revenue of $19.31 billion.

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