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Dell, `Humming,' to Meet Profit Forecast

Wall Street Journal; New York, N.Y.; Oct 5, 2001; By Gary McWilliams;

|Edition:  |Eastern edition |

|Start Page:  |B.6 |

|ISSN:  |00999660 |

|Subject Terms:  |Earnings forecasting |

| |Financial performance |

|Companies:  |Dell Computer CorpTicker:DELLDuns:11-431-5195Sic:334111Sic:334111Duns:11-431-5195 |

Abstract:

Dell, based in Austin, Texas, is the second technology giant to stick to projections made before the terrorist attacks drove the markets and consumer confidence into a swoon. On Wednesday, Cisco Systems Inc. also confirmed it would meet financial forecasts, saying sales had recovered to near pre-attack levels.

As of 4 p.m. in the Nasdaq Stock Market trading yesterday, Dell jumped $1.68, or 8.1%, to $22.32. Shares have rebounded sharply in the last week, after hitting a 52-week low of $16.01 on Sept. 21. Also helping: news that Chairman Michael S. Dell purchased nearly $72 million of the company's stock in the two weeks following the attacks.

Late last year, Dell launched a price war that has squeezed profit margins at rivals, forcing home-PC maker Gateway Inc. to exit from international markets and Compaq to seek a partner. While Dell has also been forced to retrench from Internet businesses and cut some 5,000 employees, it remains the only company making profits on its PCs.

|Full Text: |

|Copyright Dow Jones & Company Inc Oct 5, 2001 |

Dell Computer Corp., bucking a trend of gloomy outlooks among its rivals, said it expects to meet fiscal third-quarter earnings and revenue forecasts.

In a conference call with investors, the world's largest personal-computer maker said business hasn't significantly changed from its August expectations, when it said sales and earnings would fall below year-earlier levels. Dell had forecast $423 million in profit before charges, or about 15 cents a share, on sales of between $7.2 billion and $7.6 billion for the quarter ending Nov. 2.

"We think our business model is humming maybe better operationally than it ever has," said Dell's president, Kevin B. Rollins. While conceding sales declined in the days following the Sept. 11 attacks, he said: "We saw it frankly rebound quicker than we thought as we went into the weekend."

In the year-earlier quarter, Dell earned $674 million, or 25 cents a share, on sales of $8.26 billion.

Dell, based in Austin, Texas, is the second technology giant to stick to projections made before the terrorist attacks drove the markets and consumer confidence into a swoon. On Wednesday, Cisco Systems Inc. also confirmed it would meet financial forecasts, saying sales had recovered to near pre-attack levels.

Both companies' fiscal quarters extend at least into October. In contrast, computer maker Compaq Computer Corp., which warned on Monday it would post a loss and a sales drop of as much as $1 billion, closed its books on Sept. 30, allowing for less recovery time. Compaq also said its sales were disrupted by its agreement to be acquired by Hewlett-Packard Co.

As of 4 p.m. in the Nasdaq Stock Market trading yesterday, Dell jumped $1.68, or 8.1%, to $22.32. Shares have rebounded sharply in the last week, after hitting a 52-week low of $16.01 on Sept. 21. Also helping: news that Chairman Michael S. Dell purchased nearly $72 million of the company's stock in the two weeks following the attacks.

Late last year, Dell launched a price war that has squeezed profit margins at rivals, forcing home-PC maker Gateway Inc. to exit from international markets and Compaq to seek a partner. While Dell has also been forced to retrench from Internet businesses and cut some 5,000 employees, it remains the only company making profits on its PCs.

"The pricing strategy seems to be working," said Mr. Dell. Even as competitors' revenues are falling faster than expenses, Dell expects to report its third quarter in a row with operating profit of better than 7% of sales.

Indeed, the company said it expects to continue to gain market share from harder-hit rivals while maintaining its operating margin. Dell said its PC sales in Europe were up 42% during the month of August, compared with just a 4% market increase. Overall, the company's sales in Europe and Asia have hewed close to expectations, despite slowing markets. "Our share is strong and increasing," said Mr. Dell.

While sales slowed sharply after the Sept. 11 attacks, the company experienced an immediate sales pickup from replacement and relief operations. It shipped some 35,000 computers to companies and agencies directly affected by the attacks.

While U.S. business customers have deferred large computer projects, government and education customers, and new account wins, have taken up some of the slack, the company said.

Credit: Staff Reporter of The Wall Street Journal

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