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Dell Posts 24% Jump in Net Income

Times Staff Writer

Dell Inc. said Thursday that strong sales of computer servers and storage systems as well as healthy growth overseas helped boost its fiscal second-quarter earnings 24% to $621 million.

The profit, equivalent to 24 cents a share, was up from $501 million, or 19 cents, in the same period last year. Revenue for the Round Rock, Texas-based computer manufacturer jumped to $9.8 billion from $8.5 billion a year earlier.

But that growth, including a 27% increase in total product shipments, doesn’t mean companies are loosening their purse strings and boosting their spending on information technology, Chief Executive Michael Dell said.

“Large corporations have budgets, and when were they set? Last year,” Dell said in a conference call with reporters. “There haven’t been a whole lot of things to make corporations change their budgets.”

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Company spending on technology products such as desktop PCs and network servers is a closely watched benchmark of the health of the high-tech industry and the economy in general. Though companies are continuing to upgrade aging computers, Dell hasn’t seen a big surge in overall sales, the CEO said.

“It’s sort of incrementally improving,” Dell said. “There’s increased optimism among CEOs of large companies.”

Dell Chief Financial Officer Jim Schneider said the company is likely to earn 26 cents a share in the third quarter on revenue of $10.5 billion.

“The results were fine, with a good outlook,” said Andrew Neff, a technology analyst with Bear, Stearns who does not own Dell shares.

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Dell shares, which rose 8 cents to $31.39 in regular Nasdaq trading, dipped to $30.76 in after-hours trading after the earnings report.

Dell has about 32% of the U.S. personal computer market and 17% of the global PC market based on units shipped, the top positions in both, according to technology market research firm IDC.

Shipments grew 46% in the Asia-Pacific region, including Japan, and 31% in Europe, the Middle East and Africa, Schneider said.

Excluding Dell, growth in those regions was 6% and 12%, respectively, Schneider said.

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“The fact that they’re growing overseas gives us confidence that they will continue to gain market share,” said James Ragan, a technology analyst with Los Angeles brokerage Crowell, Weedon & Co.

Dell managed to cut operating costs to an all-time low of 9.6% of revenue. That helped pump up profit in the three months ended Aug. 1, which traditionally is slower than the February-April period.

“The company’s done a good job of taking operating costs out of the business -- $3 billion out of costs in the last two years,” said Ragan, who owns Dell shares.


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