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Additional Week Helps Dell

The computer maker posts a 52% jump in profit after a series of soft quarterly reports, but it says its earnings growth will ease.

February 17, 2006|Terril Yue Jones | Times Staff Writer

Recovering briefly from recent stumbles, Dell Inc. said Thursday that profit for its fourth quarter soared 52%. But the world's largest computer maker warned of another period of slower growth.

Dell reported a profit of $1.01 billion, or 43 cents a share, for the quarter ending Feb. 3, up from $667 million, or 26 cents a share. Revenue was $15.2 billion, up 13%.

Operating profit was also 43 cents a share. Analysts had expected 41 cents a share, up from 37 cents a share in the same period a year earlier, according to analysts surveyed by Thomson Financial.

"It was a good quarter given that Dell had missed their numbers the last couple of times," said James Ragan, an analyst with Crowell, Weedon in Los Angeles.

Said Pacific Crest Securities computer analyst Brent Bracelin: "It was a really, really strong quarter, but understand they had an extra week of sales, which helped artificially boost revenue."

More important was Dell's projection for this quarter, Bracelin said. "Their guidance is very weak. There is a PC slowdown, which is negatively impacting Dell."

Dell estimated that sales would increase 6% to 9% in the first quarter following several quarters of double-digit growth.

For the current quarter Round Rock, Texas-based Dell expects earnings of 39 cents to 41 cents a share on revenue of $14.2 billion to $14.6 billion. That compares with analysts' expectations of 41 cents a share and $14.7 billion

The earnings report was released after the stock market closed.

Shares of Dell rose 19 cents Thursday to $31.96, but the stock fell to $31.69 in after-hours trading.

"People are worried about their lackluster guidance," said Ragan, who owns Dell shares. "They want to be conservative. Given that the quarter is only 2 weeks old for them I think it's OK to be conservative."

Ragan said he expected Dell to come in at the high end of the revenue estimate.

Chief Executive Kevin Rollins, on a conference call with reporters, acknowledged that the 14th week of sales in the quarter "gave us a little bit of a pop."

Dell's earnings came a day after rival Hewlett-Packard Co., the world's No. 2 PC maker, said its first-quarter profit jumped 30% thanks to a cost-cutting turnaround plan and strong sales of laptops and printing supplies.

Rollins noted that Palo Alto-based HP's sales for the quarter grew 5.6%, while Dell's leapt 13%.

Although it has small kiosks in some shopping malls, Dell sells primarily through its low-overhead direct model over the Internet and by telephone, so it is vulnerable if buying trends favor retail outlets.

"Dell doesn't have a retail presence, while HP sells largely through retail," said Rob Enderle, principal analyst of the Enderle Group, a Silicon Valley consultancy.

"The only PC company showing better growth than HP is Acer (Inc.), which is 100% retail," Enderle said. "That implies that a lot of the strength right now is in retail, and that Dell is taking a hit because it's not there."

For the full fiscal year, Dell earned $3.57 billion, or $1.46 a share, compared with $3.04 billion, or $1.18, in the previous year,

Revenue for the full year was $55.9 billion, compared with $55.5 billion anticipated by analysts and up 14% from a year earlier.

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