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Dell's Quarterly Profit Climbs 42%, as Forecast

May 19, 1999|From Bloomberg News

ROUND ROCK, Texas — Dell Computer Corp., the No. 1 direct-seller of personal computers, said fiscal first-quarter profit rose 42%, disappointing some investors who were betting the company would top forecasts.

Instead, Dell matched First Call Corp. estimates, earning $434 million, or 16 cents a share, up from $305 million, or a split-adjusted 11 cents, in the year-earlier period. Sales rose 41% to $5.54 billion from $3.92 billion.

Some analysts expected Dell to roar back from last quarter's slowdown in sales growth with earnings as high as 18 cents and sales of $5.7 billion. Investors have become accustomed to revenue gains of more than 50% a quarter, and Dell's shares fell 6.7% after the release.

"Dell is judged by a high standard," said Steven Milunovich, a Merrill Lynch & Co. analyst, who rates the stock "accumulate."

Adding to optimism for Dell were better-than-expected earnings from IBM Corp. and Hewlett-Packard Co., the world's No. 1 and No. 2 computer makers. Both benefited from a PC business turnaround.

Dell shares rose 81 cents to close at $44.06 in regular Nasdaq trading, but dropped to $41.38 in after-hours trading following the release of the earnings report.

Still, results for Round Rock, Texas-based Dell were respectable compared with growth in the computer industry and for its rivals. Compaq Computer Corp., the No. 1 PC maker, had first-quarter earnings that were half analyst forecasts.

The company expects sales to increase at a steady pace for the rest of the year, Chief Financial Officer Tom Meredith said.

"Our momentum and outlook across the business seems to be in pretty good order," he said.

Dell benefited from demand from consumers and small businesses, where sales rose 54%. Sales at the company's Web site increased to more than $18 million a day, accounting for 30% of revenue. Dell sells its machines directly to customers, helping it cut costs and benefit from lower prices for parts.

At a Glance

* Applied Materials Inc., the No. 1 semiconductor-equipment maker, said its fiscal second-quarter profit rose slightly, beating the most optimistic forecasts, as it sold more of its newest tools.

Net income rose to $141.6 million, or 36 cents a share, from $141.2 million, or 37 cents, a year ago. Analysts expected 27 cents, the average forecast from First Call Corp., though many said Santa Clara, Calif.-based Applied might earn as much as 35 cents. Sales for the period ended May 2 fell 5% to $1.12 billion from $1.18 billion.

* Top Internet portal firm Lycos Inc. posted a net loss, excluding charges, of $1.02 million, or 2 cents a share, compared with a pre-item loss of $3.47 million, or 11 cents, in the year-earlier quarter, beating Wall Street estimates by 1 cent.

Revenue for Waltham, Mass.-based Lycos, which last week saw its planned merger with USA Networks Inc. and Ticketmaster Online-CitySearch Inc. unravel, surged 132% in the quarter to $35.1 million from $15.1 million in the year-earlier quarter.

MORE EARNINGS: C14

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