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Dell shares fall in afterhours on growth concerns

Look for slower revenue growth next year, Dell Computer (Nasdaq: DELL) said Thursday.

During the computer maker's fiscal third quarter conference call, executives told analysts to look for 20 percent growth in fiscal 2002, with earnings per share rising slightly faster. First Call consensus had been predicting EPS growth between 24 and 25 percent in 2002.

Although some analysts also expected the company to lower its fourth quarter targets, Dell officials reiterated their earlier fourth quarter goals of revenue around $8.75 billion. The company sees full 2001 earnings of 93 cents per share, or a penny better than the First Call consensus estimate.

Shares of Dell fell to 26.5 in afterhours activity on the Island electronic communications network, following the third quarter discussion. Dell stock slid 1.9375 to 28.375 in Thursday's regular trading, prior to the earnings report.

Dell earned $674 million, or 25 cents a share in the third quarter. That was in line with First Call's consensus forecast.

The $8.26 billion in third quarter sales represents a 22 percent improvement from the year-ago quarter when it earned $483 million, or 18 cents a share, on sales of $6.78 billion.

Most analysts were predicting sales of between $8 to $8.5 billion in the quarter.

Although average selling prices fell 4 percent sequentially in the third quarter, gross margins in the quarter rose to 21.3 percent. Component prices fell throughout the quarter, which let Dell cut prices aggressively, executives said.

The company in recent quarters has pinned its growth hopes on sales to corporations and large organizations. "Dell has its sights firmly set on capturing signifcant share of the profitable growth being generated in the enterprise space," CFO James Schneider told analysts.

Company officials said sales of its servers and notebook computers increased 40 percent in the quarter.

Dell's enterprise business is currently on pace to generate more than $6 billion in annual revenue, CEO Michael Dell said. However, that focus has also affected Dell, particularly in Europe, where the company continues to see slower demand in the business market. Price wars have also been especially fierce in the corporate space, Dell executives said.

Although the Euro continues to hurt earnings, currency effects have already been factored into the company's analyst guidance, Schneider said.

Sales into the Americas improved 24 percent in the quarter while the Asia-Pacific and Europe/the Middle East and Africa regions posted 39 percent and 7 percent, respectively.

Earlier in the quarter, Dell warned that sales into Europe would dent its top line this quarter.

Twenty-one of the 27 analysts tracking the stock maintain either a "buy" or "strong buy" recommendation.>