The emergency shipments, along with new customer acquisitions and increased orders from the public sector, mean that Dell will likely meet forecasts issued prior to the events of Sept. 11, Rollins says. In mid-August, Dell said it expected third-quarter per-share earnings of 15 cents to 16 cents on revenue of $7.2 to $7.6 billion. The company is expected to report third-quarter results on Nov. 15.
Dell's confidence in its ability to meet third-quarter expectations contrasts markedly with statements issued earlier in the week by archrival Compaq. The Houston PC maker, in the throes of uncertainty caused by its proposed merger with Hewlett-Packard, said it is unlikely to meet earlier guidance for the quarter. Compaq in July said it expected to post third-quarter earnings of 7 cents to 9 cents per share on revenue of $8 billion to $8.4 billion. But Monday the company said it now foresees a per-share loss of 5 cents to 7 cents on revenue of $7.4 billion to $7.5 billion. Compaq CEO Michael Capellas blamed the shortfall on the Sept. 11 attacks. The incidents "disproportionately affected the current quarter--market demand slowed and transportation logistics were disrupted," Capellas said in a prepared statement.
Rollins said that, despite a drop-off in orders in the days immediately following the attacks, Dell's sales quickly rebounded. "At least part of that was due to emergency relief orders we were expediting and bringing to the fore," he said during a mid-quarter update for financial analysts.
Rollins also said Dell is "capitalizing on confusion" generated by the impending merger of Hewlett-Packard and Compaq. "This proposed combination presents us with a profound opportunity," he said.
Rollins said Dell is also benefiting from a desire by cash-strapped corporations to move from Unix servers to the lower priced Intel processor-based machines in which Dell specializes. "Ten years ago less than one in three servers installed was Intel-based. Today it's nine out of 10," Rollins said.
Blue Shield of California recently replaced 126 servers from various vendors with 40 Dell servers. The health-care provider's consolidation onto a single vendor Intel platform "is driven by cost and performance considerations," says Blue Shield senior VP and CIO Dave Bowen.
Analysts believe that another factor helping Dell outperform the competition amid the current downturn is its emphasis on direct sales via the Internet, which gives the company the agility to take advantage of component prices that are falling as much as 5% per week. "Compaq is stuck with much more inventory in the channel, whereas Dell can negotiate new prices with suppliers almost weekly," says Technology Business Research analyst Brooks Gray.
Beyond the current quarter, Dell officials said they believe an uptick in IT spending is in the offing. Said Rollins, "The replacement cycle driven by Y2K spending in 1999, and postponement of upgrades this year, will have a strengthening effect on demand as we move through the next year."