Dell reports upbeat Q2 earnings

Saying that it's winning over new customers, Dell Computer Co. reported shipping a record number of computer systems in the second quarter of fiscal 2003 on its way to ringing up revenue totaling $8.45 billion. That's up 11% from the same period a year ago, when Dell reported revenue of $7.6 billion.

The company, in a statement released after the close of financial markets this afternoon, reported net income of $501 million, operating income of $677 million and earnings per share of 19 cents.

"There's a fundamental, widespread customer shift to standards-based information technology occurring, because it offers great performance, tremendous flexibility and costs much less," said Kevin B. Rollins, Dell's president and chief operating officer. "Dell is benefiting by winning new customers at an unprecedented rate."

Dell officials highlighted shipments to enterprise customers, citing an 18% rise in sales of its PowerEdge servers. Those sales come at a time when the overall server market has been generally flat, the company said.

Chairman and CEO Michael Dell attributed part of the company's growth in shipments to its entry into new enterprise markets, such as storage. External storage systems revenue grew 70%.

Dell also affirmed the company will enter the printer and personal digital assistant (PDA) markets but declined to specify when. He described both markets as attractive, especially the printer market, which he valued at $40 billion.

The company will introduce products based on Intel Corp.'s Itanium 2 server chips when "we believe there is a volume market there," Dell said. Grid computing and clustering products are gaining momentum as must-have enterprise technologies, he said.

U.S. shipment growth was up 23%, with a 21% increase in shipments to government and educational customers. Shipments to the Asia-Pacific region and Japan grew 12%, led by 35% growth in China. The Europe, Middle East and Africa market grew 5% in terms of shipments.

The company also said shipments of its Dell Precision workstations rose 24% compared with the same quarter a year ago.

Looking ahead, Rollins said Dell's shipments from the second quarter to the third could increase more than 5%. The company expects revenue for the next quarter to come in at $8.9 billion, which would be up 19% from the same quarter last year.

Just last month, Dell said that its growing share of the server marketplace would boost its earnings estimates for the quarter just ended (see story). The company had predicted that its second-quarter revenue would reach $8.3 billion, with earnings per share of 19 cents. Those projections were higher than those Dell originally announced May 16.

Dell does not count stock options as an expense when tabulating these results, it said. It has no specific plan to do so but is studying the issue, the company said.

Tom Krazit of the IDG News Service contributed to this report.

Copyright © 2002 IDG Communications, Inc.

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