Dell Q1 revenue, net income up sharply once again

Dell's first-quarter revenue and net income soared on strong sales of high-margin products such as servers and notebooks, the company said Thursday.

Revenue for the first quarter in Dell's 2005 fiscal year, or the period ended April 30, was US$11.5 billion, up 21 percent from the first quarter of last year and slightly more than the US$11.4 billion expected by industry analysts polled by Thomson First Call. Net income was US$731 million, up 22 percent from the US$598 million Dell earned in the first quarter of fiscal 2004.

Earnings per share were US$0.28, equaling analyst estimates from Thomson First Call. Dell raised its revenue guidance in April on strong sales outside the U.S. but reiterated its earnings per share guidance.

The first-quarter results kept intact a streak of solid quarters from the Round Rock, Texas, company, said Jim Schneider, Dell's chief financial officer, on a conference call following the company's announcement. "We've increased shipments and net income by more than 20 percent for seven straight quarters," he said.

Server shipments increased 24 percent, and notebook shipments rose 39 percent, Dell said. The growth in the company's shipments exceeded that of other industry vendors in both categories, Dell said.

The company increased shipments to Europe, the Middle East, and Africa by 33 percent year over year, Schneider said. Dell also now leads the industry in Intel architecture-based server shipments to both Japan and China, the two largest markets in Asia-Pacific, he said.

Dell's U.S. corporate business had the best quarter it has seen in three and a half years, Schneider said. The company has seen stronger growth outside the U.S., mainly because the majority of its business is done within North and South America, but U.S. corporate demand appears as healthy as ever, he said.

"We're not seeing huge replacements, but you're seeing people are more active, and (there are) more bids and interest in upgrades," Schneider said.

Component costs increased a little bit more than the company had expected in the first quarter, Schneider said. Memory prices have risen steadily over the last few months, although Dell expects the prices to stabilize in the second quarter, he said.

Inventories, an important measure for a company that prides itself on its lean manufacturing and distribution organization, also grew slightly. Schneider acknowledged the US$425 million in inventories was a little higher than he would like, but the company isn't worried because it is coming off historic lows in inventory expenses, he said. Dell now has four days of inventory on hand, whereas last quarter it had only three days of inventory in stock, an all-time low, he said.

Looking ahead to the second quarter, Dell expects to record US$11.7 billion in revenue and post earnings per share of US$0.29, Schneider said. Both figures represent 20 percent increases as compared to last year's second quarter.

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Tom Krazit

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