Dell beats 2Q estimates, still sees 30 percent growth this year

Dell Computer topped analysts' estimates by a penny a share in its second quarter Thursday, earning $603 million, or 22 cents a share, on sales of $7.7 billion.

First Call Corp. consensus expected the PC maker to earn 21 cents a share in the quarter.

Dell (Nasdaq: DELL) shares closed off 1/16 to 41 3/4 ahead of the earnings report.

The $7.7 billion in sales marks a 25 percent improvement from the year-ago quarter when it earned $507 million, or 19 cents a share, on sales of $6.14 billion.

Company officials credited an enhanced product mix and favorable pricing and component costs for the upside surprise.

"Our second-quarter results and expectations for strong industry demand in the second half of the year keep us on track toward our goal of 30-percent full-year sales growth," said CEO Michael Dell in a prepared release. "There remains tremendous room for expansion in all product categories, customer groups and regional markets, and the fundamental advantages of our direct model are more compelling than ever."

More than 50 percent of its total sales were made online this quarter.

Last week, Dell was downgraded by USB Piper Jaffray's Ashok Kumar.

Kumar cut the stock from a "strong buy" recommendation to a "buy," saying Dell has fallen into a "real technical deterioration" in the past year and doesn't possess anywhere near the momentum it did in 1997 and 1998.

"We continue to believe that Dell does not have adequate earnings power in notebooks, server and nonsystem revenue to offset the secular weakness in consumer and commercial desktops," Kumar wrote in a research note. "Current revenue growth guidance of 30 percent is unsustainable."

In fact, Kumar predicted Dell would post second-quarter sales of $7.85 billion.

In its first quarter, Dell beat the Street estimate, earning $525 million, or 19 cents a share, on sales of $7.3 billion.

First Call Corp. consensus expects it to earn 25 cents a share in its third quarter and 92 cents a share in the fiscal year.

Dell shares peaked at 59 11/16 in March after falling to a low of 35 in February.

Twenty-four of the 28 analysts tracking the stock rate it either a "buy" or "strong buy."