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Can Dell do it again?

Set to report its fiscal third-quarter earnings today, the PC manufacturer is riding a year-long wave of accomplishments.

    Success brings its own burdens, Dell is discovering.

    Set to report its fiscal third-quarter earnings today, the PC manufacturer is riding a year-long wave of accomplishments, having added market share faster than the rest of the industry and posted financial results that generally exceeded expectations. Accordingly, the Round Rock, Texas, company's stock price tripled over the past 12 months.

    Analysts are predicting earnings of 27 cents per share, based on an average of estimates from First Call. That's up from a split-adjusted 17 cents per share from the same period a year ago.

    For some, expectation of strong earnings from Dell and PC industry bellwether Intel are signs that PC demand is holding up after a weak first half of 1998.

    "People are relieved that PC demand is holding up very well despite a slowing U.S. economy and declining consumer confidence," said Erika Klauer, an analyst at BT Alex. Brown in New York. Investors "are feeling good about that," she said in reference to news that Intel is also expected to post stronger-than-anticipated earnings.

    But others believe that Dell's steep ascent may begin to flatten out. How long, after all, can this last?

    Ashok Kumar, analyst with Piper Jaffray, said in a report that Dell's desktop shipments between the second and third quarters grew 8 percent, which means the company lagged slightly behind the overall worldwide market, which grew at 10 percent. Desktop shipment numbers are important, he said, because they make up 80 percent of Dell's shipment volume.

    Those numbers primarily reflect a decline in unit shipments in Japan and Western Europe, Kumar stated. US shipment numbers are expected to remain a strong 17.2 percent.

    To keep growing at historic rates, Dell will have to rely less on selling into its own customer base and taking customers form others, which is tougher to do, said Kumar.

    On the other hand, Scott Miller, PC market analyst with Dataquest, isn't sure how much stock should be put into estimates gauging second- to third-quarter growth, since PC makers such as Compaq were blowing out excess inventory during that time. For many, shipments dropped off significantly. Third-quarter numbers as a result look pretty healthy for Dell's competitors and don't necessarily reflect the underlying strength of demand for Dell's products, Miller said.

    Nonetheless, Dell is stuck in a cycle of needing to outdo itself on a quarterly basis. "The issue Dell will face over the next year is not whether they are solid or profitable, it is whether they can keep beating the ever increasing expectations of Wall Street," Miller said.

    Bloomberg contributed to this report.