Dell Computer’s Earnings Flat
Dell Computer Corp. on Thursday reported flat first-quarter earnings and said second-quarter sales would decline, as the No. 1 personal computer maker continued to lead the industry into a price war.
The company, based in Round Rock, Texas, reported net income of $462 million, or 17 cents a share, compared with $466 million, or 17 cents, a year earlier, meeting the consensus of analysts polled by First Call/Thomson Financial.
Sales rose 10% to $8 billion.
“We delivered on the revenue and profit guidance we provided at the start of the quarter,” said Michael Dell, chairman and chief executive.
Executives said second-quarter earnings per share would be at best flat with the first quarter at 17 cents, and could go as low as 15 cents. They also said they see a sales decline of 3% to 5% from the first quarter.
Analysts were expecting a range of 16 cents to 20 cents for Dell’s second quarter, which ends in July. The consensus was for 18 cents, according to First Call/Thomson Financial.
Dell President and Chief Operating Officer Kevin Rollins said aggressive pricing will continue.
“Price competition in the marketplace is very intense, but it’s been that way since the fourth quarter, and the preferences of customers are clearer than ever,” Rollins said.
Despite falling prices, Dell’s first-quarter gross margin of 18% was flat from the previous quarter, helped by growth in sales of more powerful business and notebook computers.
“If things had been bad on the margin side, they would have had to become less aggressive in the price war they are driving in the industry,” Meta Group analyst Steve Kleynhans said.
“They’ve laid off a bunch of people and consolidated operations. That says they may be able to continue this price war through the summer,” he added.
Executives declined to give an outlook for gross margins as a percentage of revenue. But second-quarter net operating margins would be flat or slightly down, executives said.
The announcement came after the close of Nasdaq. Dell’s shares traded at $24.94 in after-hours trading, after closing up 50 cents at $25.88 on Nasdaq.
The stock, which was the top performer of the S&P; 500 in the 1990s, has underperformed that index by more than 40% since the beginning of 2000.
