Dell matches revised estimates for third quarter

reported solid earnings for its fiscal third quarter. The earnings report comes more than a month after the company revised its revenue estimates for the quarter.

The Round Rock, Texas-based hardware maker closed the quarter with revenue of $8.26 billion. A year earlier, it had $6.78 billion in revenue.

Dell also reported $674 million in net income for the quarter, or 25 cents per share, matching the consensus from 21 analysts polled by First Call/Thomson Financial. Net income rose 40% compared with last year's third quarter. The comparison excludes a one-time acquisition charge of $194 million from last year's third quarter.

Last month, the PC-making giant warned that third-quarter revenue would likely be around 3% lower than expectations (see story). Like many PC vendors, Dell blamed its problems on lower demand in Europe and from small businesses.

"As mentioned last quarter, we have been negatively affected by a slowdown in Europe, which makes up a large portion of our business," said Jim Schneider, chief financial officer at Dell, in a conference call with press and analysts after the earnings announcement. "The euro itself continues to decline. It is clear that it is having an impact on us from a revenue standpoint."

Elsewhere, Dell said notebook and server shipments are growing at a fast clip.

"More than 50% of our revenue - and about two-thirds of our operating profit - came from sales of enterprise products, notebooks and services," said Michael Dell, chairman and CEO, in a statement. "Our worldwide shipments of servers and notebooks grew significantly faster than the overall industry rate."

Dell added, however, that his company's competitors made gains against the vendor in the last couple of quarters. He said increased competition would force to Dell to focus more heavily on furthering its direct sales model.

"It is clear that in the second quarter and at the beginning of the third, some of our competitors became incrementally more efficient," Dell said in the conference call. "We believe this dynamic slowed our market growth."

"We are moving more aggressively to take advantage of our [direct sales] model," he said.

The company will continue to concentrate on the large corporate market and tap into strong demand for storage and servers, Dell said. He pointed to a recent deal in which Dell will provide storage equipment to the U.S. Navy, as well as its new stand-alone storage group, as evidence of this increased focus.

Dell increased shipment volumes of its Inspiron and Latitude notebook lines by 50%, the company said. Total sales of its server, storage and workstation systems also rose 37% from last year's total.

Dell said revenue in the Americas region rose 24%, with the small business and consumer segments leading the way. Within that figure, Latin America revenue surged 56% for the quarter.

As expected, the vendor didn't report robust sales in the Europe, Middle East and Africa (EMEA) markets. Sales to small businesses and consumers in those regions did move higher by 25% year-over-year; however, total sales in the EMEA segment were up only 7%.

The emerging China market provided a bright spot for the vendor, generating a 70% increase in sales. Dell also began selling hardware to companies in India during the period and reported a 39% increase in revenue to large corporate customers in the Asia-Pacific/Japan region.

Schneider said he expects Dell to generate around $32 billion in revenue for fiscal 2001. The company posted revenue of $25.26 billion in 2000.

"This all translates into 92 cents in [earnings per share] for the year," he said. "We will continue to take advantage of the decline in component costs to drive market share gains."

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