Dell profits from surge in corporate sales

By John G. Spooner

Dell Computer slightly improved upon revenue expectations for its second quarter and predicted better things to come.

The computer maker announced after market close on Thursday that it recorded a profit of $501m, or 19 cents per share, on revenue of $8.46bn for its second fiscal quarter, which ended 2 August. During the same period a year ago, Dell posted a loss of four cents per share including charges.

Analysts expected the company to post a profit of 19 cents per share on quarterly revenue of $8.28bn. The unexpected increase in revenue stemmed from higher unit sales, especially to corporate customers, Dell said.

Although most major PC manufacturers are losing money and are seeing a decline in market shares, Dell is expanding, the company said in a statement, predicting that the growth will continue. PC shipments for the industry as a whole are likely to be the same or up slightly from the second quarter to the third - a usual seasonal phenomenon, executives said.

Dell's shipments, however, could increase by five per cent or more sequentially. As a result, the PC maker said it expects to record profit of 20 to 21 cents on revenue of $8.9bn for its third quarter.

The company increased its server shipments by 18 per cent year on year, while workstations were up 24 per cent, and notebook shipments grew by 17 per cent.

Overall, Dell executives said they are optimistic about the company's progress in market-share growth and its cost-cutting strategies. Increasing unit sales while reducing costs will allow the computer maker to continue to be profitable in future quarters, they said.

Dell is also cautiously eyeing a PC market recovery in some areas, but so far the company hasn't seen an increase in activity from large corporations. Consumers, small businesses and government customers have made up most of its sales recently.

"We're really pretty hopeful and feeling pretty good about the consumer business... going into the Q3 back-to-school season," said Michael Dell, the company chairman and CEO.

"We've seen some bright spots, but they have been in pockets," he added. "We haven't seen an overall uptick across the board."

At the close of regular trading, Dell shares were down one cent to $27.14. The earnings report was issued after the close of regular trading.

John G. Spooner writes for News.com