Rising Sales Boost Dell’s Profit 42%

Dell Computer Corp.’s operating profit rose 42% in its fiscal third quarter, in line with forecasts, as growing sales to small customers and over the Internet more than offset higher costs for components.

The world’s largest direct seller of personal computers said it earned $483 million, or 18 cents a share, up from $384 million, or 14 cents, a year ago, as revenue climbed 41% to $6.78 billion. The latest results exclude $194 million in one-time costs related to the acquisition of ConvergeNet Technologies.

Dell had warned last month that rising memory-chip prices and a shortage of parts caused by a September earthquake in Taiwan would reduce profit. Investors focused on whether those issues, falling prices for PCs and slower corporate sales because of year 2000 concerns would cut Dell’s revenue as well.

“They have alleviated any of the concerns about a slowdown,” said Steven Salopek, an analyst with Banc One Investment Advisors, which owns almost 11 million Dell shares. “It was very reassuring.”

Many analysts lowered their profit forecasts slightly last month after Dell issued a warning. Analysts polled by First Call Corp. expected 18 cents a share, while some estimates published on the Internet were as high as 21 cents.

Dell, based in Round Rock, Texas, said its shipments of personal computers grew at more than twice the industrywide rate.

But largely because of rising memory chip prices late in the quarter, net income represented just 7.1% of revenue, compared with 8% in the year-earlier period.

Dell said it’s selling $35 million worth of computers a day on the Internet, or 43% of its sales.

In advance of the report, released after the close of the Nasdaq Stock Market, Dell’s shares closed up $2 at $43.44.

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Bloomberg News was used in compiling this report.