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Dell reports strong third-quarter profit

Dell Inc., the world's largest personal computer maker, Thursday posted a higher quarterly profit, helped by market share gains and lower component costs despite slowing demand for corporate PCs.
/ Source: Reuters

Dell Inc. said its profit surged 25 percent in the third quarter as the world’s largest personal computer maker posted record sales due to rising technology spending in the corporate and government sectors in the United States and abroad.

Dell said Thursday that it earned $846 million, or 33 cents a share, compared with $677 million, or 26 cents a share, a year earlier.

The results matched the forecasts of analysts surveyed by Thomson First Call as well as predictions the Round Rock, Texas-based company made in August.

Revenue rose 18 percent to $12.5 billion for the three months ended Oct. 29, up from $10.6 billion a year earlier.

Dell chief executive Kevin B. Rollins said he expected fourth-quarter shipments would be about 20 percent higher than a year ago. He predicted fourth quarter earnings of 36 cents per share, an increase of 24 percent, on revenue of about $13.5 billion, up 17 percent.

And driven by the continued double-digit growth and the company’s direct-sales model, the computer giant said it was on track to become a $60 billion company sometime in 2006, roughly a year ahead of schedule.

“They seem as strong as ever,” said Tim Bajarin, analyst at Creative Strategies. “Dell’s business model still is the most effective when it comes to selling PCs to the customer.”

For the third quarter, Dell saw 27 percent growth in Europe, the Middle East and Africa. The Asia Pacific region and Japan grew by 25 percent. Dell said it was helped in the United States by a 20 percent increase in spending by business customers.

“Our confidence in hitting some pretty good numbers is increasing,” Rollins said. “We’re ahead of plan. The growth rates appear to be achievable.”

In the past several years Dell has increasingly pushed into consumer electronics, recently launching a revamped line of tiny digital music players and large plasma screen televisions.

Rollins, however, said Dell’s consumer business still accounts for just 15 percent of the company’s revenue.

Most of Dell’s business remains centered on the sale of large computer servers to corporations and other areas like technology services.

“We believe in the advent of the digital home and the opportunity to combine more products in the home, but consumer is not our number one focus,” he said. “It’s the enterprise.”

Rollins was particularly pleased with Dell’s printer business, which is on track to sell more than 5 million printers this year, calling it “the most successful of any startup business we’ve ever had at Dell.”

Dell spent $1.3 billion to buy back 38 million shares of its own stock in the quarter, bringing the total amount of repurchased stock to $3.3 billion this year.

Dell has about 13 percent of the global computer market and employs about 53,000. The company had $41 billion in revenue last year.

Dell added 3,000 workers to its roster in the quarter, which Rollins attributed to new call center hires working directly for Dell instead of being outsourced.

Earlier this week, Dell announced plans to build its third U.S. manufacturing plant in North Carolina, employing at least 1,500 people within five years. Dell already has plants in Tennessee and Texas.

In the first nine months of its fiscal year, Dell earned $2.38 billion, or 92 cents per share, compared to $1.90 billion, 72 cents per share, in the same period last year. Revenue rose 19.4 percent, to $35.75 billion from $29.93 billion.