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THE DAY AHEAD: Here come the Dell cheerleaders

Dell Computer Corp. (Nasdaq: DELL) has always reported strong quarters and Wall Street has always found something to worry about. Dell's second quarter should break that pattern as Wall Street's cheerleaders warm up the pom-poms.

What changed? Nothing but perception and a few out-of-whack expectations.



Dell: A second half star?



In previous quarters, Dell was simply too good. Analysts got used to annual growth of 50 percent and when Dell could only deliver, say growth of 35 percent to 40 percent, Wall Street started writing the Dell obituary. As a result, Dell is well below its February high of $55.

Nevermind that Dell is a cash cow. Nevermind that Dell is taking Compaq's customers. And nevermind that Dell sells more online ($30 million a day) than most high-falutin' e-tailers combined.

So what makes this quarter so special.

Wall Street's expectations for Dell eased a bit and then the company delivered. In the quarter, Dell even beat the so-called "whisper number" with earnings of 19 cents a share. Dell is almost like a comeback story now. Of course we all know Dell didn't go anywhere.

The key line for Dell isn't the earnings. It's the sales line. Revenue came in at $6.14 billion. USB Piper Jaffray analyst Ashok Kumar was expecting revenue of about $5.8 billion.

That extra revenue means Wall Street's gurus will have to change their models and increase their revenue projections for the year. May the cheering begin.

It's all a big set up. Anyone who has watched Intel and its dance with analysts knows the drill. In the first half all the concerns pop up and the cautious ratings appear. In the second half, folks get downright giddy. Intel will be talked up and so will Dell.

Dell was optimistic, talked about conquering markets abroad and highlighted its upgrades to its Internet infrastructure. It was the usual from Dell, but this time the listeners seemed to believe a little more. There are also no worries about that dreaded Year 2000 issue and average selling prices held up fairly well at $2,200. Not bad for a company gaining market share with aggressive pricing.

Put simply it's full steam ahead for Dell. Like Gateway (NYSE: GTW), Dell is growing alternative revenue streams by selling peripherals and software online. The company is also making dramatic inroads in the consumer and small business markets. Its also moving a lot of enterprise servers, notebooks and PCs.

Dell's back in favor -- at least for a quarter. Here come the cheerleaders.

Lycos revenue impresses

Lycos Inc. (Nasdaq: LCOS) should open a few eyes with its fourth quarter sales of $45.1 million. Analysts were only expecting sales of roughly $38 million.

The portal seems to be firing on all cylinders and should get some applause for executing amid all the CMGi-USA Networks flap. Lycos reported a small profit and easily topped estimates with average daily page views of 70 million and 32.4 million registered users.

Those results are impressive, but won't put Lycos in Yahoo! Inc.'s league just yet. Yahoo reported second quarter sales of $115.2 million.

But Lycos is showing it can turn its reach into revenue. Lycos is also focusing on e-commerce and will announce plans to allow small businesses to set up storefronts. It still has work to do to grow sales, but the fourth quarter was a nice start.