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Dell beats estimates, eyes $80 billion goal

As rival HP reshuffles its executive deck, No. 1 PC maker Dell beats analysts' expectations for its fourth quarter and aims ever higher.

Higher shipments of products ranging from servers to music players helped Dell's fourth-quarter earnings exceed estimates on Thursday, making for the 16th sequential quarter the company has either met or exceeded analysts' projections.

Now the company is setting the bar higher.

The Round Rock, Texas-based PC maker, whose fiscal fourth-quarter earnings beat analysts' expectations by 1 cent per share, now is aiming for $80 billion in annual revenue, Dell CEO Kevin Rollins said in a conference call with reporters Thursday afternoon.

At market close Thursday, Dell reported net income for the quarter of $667 million, or 26 cents per share, following a one-time tax charge related to the American Jobs Creation Act, which allows corporations to repatriate foreign earnings at a reduced tax rate. Without the charge, Dell posted a higher-than-expected profit of $947 million, or 37 cents, for the quarter. That's up from $749 million, or 29 cents, a year ago.

Revenue for the quarter, which ended Jan. 28, was $13.5 billion, up from $11.5 billion for the year-ago period.

On average, analysts expected Dell to post a profit of 36 cents a share on revenue of $13.5 billion for the quarter, according to a survey by Thomson First Call.

Dell said its overall shipments increased 19 percent during the quarter, thanks to double-digit increases in many of its most prized product categories, including servers and storage systems. Printers jumped 111 percent, while even desktops grew by 16 percent. The company's enhanced services revenue, for jobs such as migrating large customers to new e-mail systems, showed growth of 32 percent.

Part of the bump came from sales to businesses. Dell saw sales to corporations in the United States rise 19 percent year-over-year during the quarter, Rollins said.

King of the PC hill
During the calendar fourth quarter, Dell ranked as the world's largest PC maker, after growing its shipments by about 21 percent worldwide to corner 17 percent of the market, according to IDC. Hewlett-Packard, which had dominated fourth-quarter shipments in the past, was second with 16 percent of the market, a growth rate of 9 percent, IDC said.

Rollins said he sees the potential for further gains, helped over time by uncertainties created by rival Hewlett-Packard's decision Wednesday to oust its CEO, Carly Fiorina. Another factor is IBM's plan, announced in December, to sell its PC business to Lenovo Group.

When asked if Fiorina's departure was an opportunity for Dell, Rollins said: "I think it probably is. Certainly I think there are some things we can do with customers."

"All in all, I think it's been a pretty good quarter for us," Rollins said, responding to a question on Dell's consumer electronics business, which the company views as an adjunct to products such as servers.

Consumer electronics, a new area for the company, also grew. Sales of Dell's Digital Jukebox music players jumped 165 percent, 144 percent over its forecast, while television sales jumped 150 percent, about 300 percent over its forecast. Sales were so swift that Dell found it couldn't source enough 42-inch plasma televisions to meet demand, Rollins said.

Given its performance in the fourth quarter and all of its fiscal 2005, Dell will soon ask analysts to consider a new vision and goal for its future, Rollins said.

Dell, which had previously set a goal of generating $60 billion in annual revenue by its fiscal 2007, now expects to draw close to the $60 billion mark this year, during its fiscal 2006, he said.

"We're pretty much on track to hit the $60 billion or so a year early," Rollins said. "That new vision will be $80 billion."

Dell will unveil more details about how it intends to reach the $80 billion mark at its financial analyst meeting in April.

Printers and supplies such as ink are likely to be part of the new plan. Dell has now sold 5.2 million printers, Rollins said, a 179 percent increase for the year. Sales for the business are on a $1.3 billion run rate, he said.

Getting started toward its $60 billion in fiscal 2006 target, Dell predicted that it would bring in revenue of $13.5 billion and earnings per share of 37 cents for the current quarter, a 1 cent higher prediction than analysts' expectation.