Dell Profit Up 55% in 3rd Quarter; Borders Reports Loss
Dell Computer Corp. said Thursday that its fiscal third-quarter profit rose 55% to $384 million, or 28 cents a share, as sales climbed 51%, somewhat less than some forecasts for the highflying personal computer maker.
Separately, Borders Group Inc., the nation’s second-largest bookseller, reported a fiscal third-quarter loss that matched estimates and said it hired a new chief executive.
Other retailers reported strong gains for the latest quarter.
Profit at Round Rock, Texas-based Dell, the No. 3 PC maker, was a penny higher than the 27 cents Wall Street expected, but some analysts nonetheless were disappointed by the results.
Revenue jumped to $4.82 billion, although less than the $5 billion some analysts expected, as sales in Asia jumped 49% and Internet sales tripled to an average of $10 million a day.
Analysts have expressed concern that tumbling PC prices and stepped-up competition, particularly from Compaq Computer Corp., could make it tougher for Dell to maintain its stellar track record of earnings and sales growth.
Compaq, the No. 1 PC maker, Wednesday unveiled its own strategy of direct selling.
Some analysts are worried by that competition and the fact that Dell’s profit topped forecasts by just a penny, especially because Dell’s stock trades at 67 times earnings and five times annual sales. Compaq trades at two times annual sales.
Dell said its sales are on track. Sales of servers and workstations more than doubled, and sales of notebook computers rose 93%.
“We haven’t seen anything that would take us off the trajectory we are on,” Dell Vice Chairman Kevin Rollins said.
Dell announced its results after the close of trading. Its shares fell $2.75 to close at $69.19 on Nasdaq.
Borders also saw its shares fall--by $2.56, or 9%, to $24.69 on the New York Stock Exchange--as it reported its expected loss of $800,000, or 1 cent a share, for the quarter and said a backlog at its West Coast distribution center cut into growth of sales at stores open at least a year.
The Ann Arbor, Mich.-based company had net income of $400,000, or break-even on a per-share basis, a year ago. Revenue grew 17% to $558.3 million.
Borders also named as its new CEO Philip Pfeffer, 53, who served as president and chief operating officer of Random House Inc. from 1996 until its acquisition by Bertelsmann earlier this year. Before that, he was chairman and chief executive of Ingram Distribution Group, parent of the book distributor Ingram Book Group.
Less than a week ago, Borders rival Barnes & Noble Inc. agreed to buy Ingram Book Group for $600 million to deliver books faster and at a lower cost.
Borders’ total same-store sales rose 3.6% and fell 1.5% at its Waldenbooks chain. The backlog at its distribution center reduced same-store sales by half a percentage point and hurt Waldenbooks same-store sales by 0.9%, Borders said. The problems that caused the backlog have been resolved, it said.
At a Glance
Other earnings, excluding one-time gains and charges unless noted:
RETAILING:
* Ames Department Stores Inc.’s third-quarter earnings climbed 77% to $6.2 million, or 26 cents a share, far exceeding estimates of 19 cents, as revenue jumped 13.6% to $599.2 million. Sales at stores open at least a year surged 12%. Ames also said it agreed to acquire Hills Stores Co., for about $330 million in cash and assumed debt, which will expand its total stores by 51% to 456 and increase its annual sales to $4 billion.
* Gap Inc. said its earnings surged 45% to $237.7 million, or 60 cents a share, topping estimates by 4 cents, as an aggressive ad campaign for its casual clothing boosted sales a strong 36% to $2.40 billion. Sales at stores open at least a year rose 13%, with all divisions posting gains.
* Lands’ End Inc. said its third-quarter earnings plunged 96% to $347,000, or 1 cent a share, including a foreign currency exchange after-tax loss of $3.4 million, from $8.2 million, or 26 cents a year ago, including a $1.2-million after-tax loss. Wall Street was expecting earnings of 22 cents. The catalog retailer of casual apparel said net sales edged up 1% to $322.4 million. Lands’ End also said future profit could be hit as it liquidates merchandise at discount prices to shrink bloated inventories.
* Kmart Corp.’s net income more than doubled to $38 million, or 8 cents a share, from $18 million, or 4 cents, matching estimates, as demand for household goods such as its Martha Stewart linens offset sluggish clothing sales. The discounter’s revenue rose 4.5% to $7.64 billion, as same-store sales rose 4.2%.
* Staples Inc. said its fiscal third-quarter earnings increased 33% to $69.2 million, or 23 cents, a penny higher than forecasts, and said it plans a 3-for-2 stock split. Revenue rose 22% to $1.90 billion, and same-store sales grew 12%.
* Starbucks Corp.’s profit rose 42% in the fiscal third quarter to $25.6 million, or 28 cents, matching estimates, as revenue jumped 31% to $357.7 million. Same-store sales grew 3%.
OTHER INDUSTRIES:
* Berkshire Hathaway Inc., billionaire Warren Buffett’s insurance and investment company, said third-quarter earnings excluding gains realized from the sales of securities rose 6.5% to $264 million, or $212 a share, buoyed by growth in its Geico Corp. auto insurance unit. Profit on investments sold fell 15% to $101 million. Berkshire’s net income, which includes realized investment gains, fell less than 1% to $365 million, or $293 a share.
* Boston Scientific reported a third-quarter loss, including charges, of $509.4 million, contrasted with net income of $88.4 million, or 44 cents, a year ago, as the medical device maker deals with accounting problems in Japan, a product recall and a large acquisition. Those problems resulted in total charges of $598 million in the quarter. It didn’t provide its profit excluding one-time items. Revenue rose 21% to $575.4 million. The company was expected to earn 37 cents excluding one-time items, according to First Call Corp., but analysts said individual estimates were varying widely because of the recent problems Boston Scientific is facing. The results were released after the close of trading.
* K-Tel International Inc. reported a loss of $3.1 million, or 37 cents a diluted share, for its first fiscal quarter, including charges of $1.6 million for discontinuing its retail home video line and other marginal businesses. It also incurred a $600,000 loss from continued investments in its e-commerce operations. The music and entertainment marketer had a profit of $1.2 million, or 15 cents, a year ago. Sales dropped 28% to $18 million, which K-Tel blamed mostly on the curtailment of its buying of media time for third parties. K-Tel announced its results after the close of regular trading.
* News Corp. said its fiscal first-quarter earnings unexpectedly fell 18% to $196 million, or 20 cents per American depositary receipt, from $240 million, or 26 cents, a year ago. Gains from movie hits at its Fox Entertainment Group Inc. failed to offset lower profit at its newspapers and losses at its cable and satellite TV businesses. A weak Australian dollar also hurt results at the company, which is controlled by Rupert Murdoch. Revenue rose 12% to $3.19 billion.
