Dell Inc., the world’s largest PC maker, on Thursday said quarterly profit rose 52 percent as it increased sales outside the United States and sold more computers to businesses.
The results topped expectations even though its forecast for the current quarter slightly lagged analysts’ targets.
“Earnings and revenue were both significantly better than expected,” said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.
“A lot of the higher-margin products are doing well,” and the market did not appear to be worried by the first-quarter outlook, he added.
Dell, known for its direct sales model developed by founder Michael Dell, said net income climbed to $1.01 billion, or 43 cents per share, from $667 million, or 26 cents per share, a year earlier.
Revenue rose 12.8 percent to $15.2 billion from $13.5 billion.
Dell reported adjusted earnings per share of 43 cents. Analysts on average had forecast earnings-per-share of 41 cents before certain special items and revenue of $14.8 billion, as compiled by Reuters Estimates.
Dell, led by Chief Executive Kevin Rollins, has been trying to stem a slide in revenue growth. It lowered prices on entry-level consumer computers last year and twice missed analysts’ revenue forecasts. The company has introduced more-expensive computers for gaming enthusiasts and demanding consumers and is increasing sales in Europe to boost growth.
Happy days outside U.S.
Dell increased its percentage of international revenue by 10 percentage points year-to-year, to 43 percent of total fiscal fourth-quarter revenue from 33 percent in the same quarter a year ago. Non-U.S sales rose 3 percentage points from the previous quarter.
Concerns about growth have held back Dell’s shares, which trade at about 18 times estimated fiscal 2007 earnings per share, the same as No. 2 PC maker Hewlett-Packard Co. (HPQ.N) for its fiscal 2006. The multiple is a discount when considering that Dell’s estimated long-term growth rate is about twice that of its smaller rival, according to Sanford C. Bernstein analyst Toni Sacconaghi.
Shares of Dell, based in Round Rock, Texas, rose 1.7 percent to $32.50 in after-hours trade following the earnings report. The stock had fallen about 22 percent in the past 52 weeks on concern over revenue growth. Dell closed at $31.96, up 19 cents, in regular Nasdaq trade.
Dell forecast per-share earnings for its fiscal first quarter ending in April of 39 cents to 41 cents before items, compared with analysts’ average estimate of 42 cents. The company sees revenue at $14.2 billion to $14.6 billion, while analysts were forecasting $14.7 billion, according to Reuters Estimates.
“The guidance for the April quarter is disappointing,” said Cindy Shaw, an analyst at Moors & Cabot Capital Markets who like 10 other analysts that follow the company, has a “hold” rating on the stock. “It suggests that revenue growth will slow further.”
But most of their colleagues remain optimistic about Dell. Of 31 analysts who track the stock, 20 have “buy” or ”outperform” rating on it.
Dell has been retooling its consumer division, which accounts for 15 percent of revenue, to focus on higher-end products such as the XPS series launched in September to appeal to gamers and tech-enthusiasts.
The company in January announced a supercharged gaming computer, the Renegade, to target the 20 percent of PC users who play video games on their computers. It also launched a 50-inch plasma television as it expands further in consumer electronics.
Dell remained the world’s top seller of PCs in the fourth quarter, with 17.2 percent of the market, followed by Hewlett-Packard Co. with 15.7 percent and China’s Lenovo Group Ltd. with 7.2 percent. In the United States, Dell claims one-third of the market for personal computers.
