Dell’s first quarter exceeds analysts’ expectations

Friday, May 30, 2008 at 3:21am

Dell Inc., the world’s second-largest personal-computer maker, yesterday reported a first-quarter profit that exceeded analysts’ estimates as sales overseas outstripped U.S. orders for the first time, sending the shares up 11 percent.

Profit amounted to 38 cents a share, exceeding the 33-cent average of estimates compiled by Bloomberg News. Revenue from Asia climbed 19 percent, and 15 percent in Europe, the Middle East and Africa, pushing total sales to $16.1 billion.

The results provide “early signs” of a turnaround, Chief Financial Officer Donald Carty said on a conference call Thursday.

Chief Executive Officer Michael Dell has spent the past year forging partnerships with retailers such as Wal-Mart Stores Inc. to help narrow the gap with Hewlett-Packard Co., which has led PC shipments for seven straight quarters.

“Despite weakness in the U.S. economy, Dell exhibited strong sales growth, aided by their improving international presence,” Edward Jones & Co.'s Bill Kreher said in a telephone interview. The St. Louis-based analyst advises investors to hang on to the shares.

Dell, based in Round Rock, Texas, now sells printers and computers through more than 13,000 stores worldwide. The shares rose $2.34 to $24.15 in late trading after closing at $21.81 the Nasdaq Stock Market. They had dropped 12 percent this year before yesterday.

Net income rose 3.7 percent to $784 million from $756 million, or 34 cents, a year earlier, Dell said in a statement. Globally, revenue from consumers increased 20 percent.

Michael Dell, 43, has added retail partners in the world's 20 largest economies since last year to help expand beyond the U.S. In the first quarter, the PC maker struck a deal to sell products through Officeworks, the largest office-supply retailer in Australia. The company also counts Japan's Bic Camera Inc. and France's Carrefour SA among its overseas retailers.

Dell cut 1,000 workers in the first quarter after acquisitions, for a total reduction of 5 percent, although none were at Nashville’s campus.

Michael Dell last year said he would cut 10 percent of the workforce by May. The executive plans to wring out as much as $3 billion in costs annually by slashing jobs and shifting production to cheaper manufacturers.

“We still have much work to do to restore our competitive position,” Dell said.

About 60 percent of Dell's revenue came from the Americas in the fourth quarter. Hewlett-Packard gets two-thirds of its sales outside the U.S., making it less vulnerable to economic slowdowns in the U.S. Dell aims to get about half its sales annually from overseas by 2009.

“Investors have a great deal of confidence in Michael Dell,” Rob Enderle, president of the Enderle Group in San Jose, Calif., told Bloomberg Radio. “Now they are a force in retail, albeit a minor one, where they weren't a force at all.”

— Bloomberg News

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