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Dell earnings match expectations

The PC maker turns a profit of $603 million on revenue of $9.7 billion for its latest quarter, giving credit to higher unit shipments of servers, storage devices and PCs.

Dell Computer on Thursday matched analysts' expectations for earnings in its fourth fiscal quarter.

The Round Rock, Texas, PC maker turned in a profit of $603 million, or 23 cents per share, on revenue of $9.7 billion for the quarter, which ended Jan. 31. Dell attributed the performance to higher unit shipments of products such as servers, storage devices and PCs.

Analysts had expected Dell to post a profit of 23 cents per share on revenue of $9.7 billion for the quarter, according to a poll conducted by First Call.

The quarterly performance tops a high-flying year for Dell, during which it boosted shipments by 20 percent, while the worldwide PC market saw only a small, 1.5 percent increase, according to market research firm IDC.

In addition, Dell raised its overall unit shipments by 25 percent year over year, with the highlights being a 28 percent increase in server shipments and an 87 percent increase in storage products, the company said in a statement.

For all of fiscal year 2003, Dell recorded a profit of $ 2.1 billion, or 80 cents per share, including charges, on revenue of $35.4 billion, matching analysts' expectations.

But while Dell successfully grew revenue and market share during the fiscal year just ended, the question that will nag the company is this: Can it repeat that performance?

For the first quarter of the new fiscal year, the company said in a statement that it expects to post a profit of 23 cents per share on revenue of $9.5 billion. Those figures represent double-digit increases from the same quarter a year earlier, but a slight sequential dip in revenue.

Despite the economic uncertainty brought on by war prospects and the resulting difficulty to predict sales, Dell executives are bullish about the company's prospects for the current quarter, given its ability to gain market share.

Typically, worldwide unit shipments in the first quarter decline by about 10 percent from the prior fourth quarter. But Dell expects its first-quarter tally will decline by only 2 percent to 3 percent, CFO Jim Schneider said in a conference call.

Worldwide PC sales will reach about 140 million units this year, CEO Michael Dell said during the conference call. That means "there's a lot of people buying a lot of things," he said. "With 15 or 16 percent market share, we see wonderful opportunities for us to grow our business."

The PC maker plans to continue to work on cutting costs internally and with its suppliers, which will help it to reduce prices and bolster its margins. The company uses price-setting as one of its primary tools in winning customers and gaining market share.

Research firm IDC predicts unit shipments will increase by about 8 percent, to 147.5 million, in 2003. Though that gives Dell a larger potential market, the company is likely to face stiffer competition for it. Hewlett-Packard, for one, promises to give it more of a run by for its money by matching its prices.

"We're prepared for this (competition)," Dell President Kevin Rollins said on the conference call. "We've identified even more cost savings for fiscal year 2004." Those cost savings, which include measures such as trimming warranty claims, will help Dell lower its prices if needed.

While economic and war-related uncertainties mar the short-term outlook for the PC market, analysts remain upbeat about Dell's prospects.

"I believe that Dell's management will make the right decisions," Technology Business Research analyst Brooks Gray said. But there are at least a few things the PC maker could do better, he said. Gray said that the company was not very active in working on management software, which companies use to monitor and maintain their PCs--to update software, for example.

"(Dell has) made some improvements at the server level, but there's not much activity at the desktop and notebook level," he said.

If competitors such as HP and IBM deliver software tools that make managing desktops and notebooks easier, they could argue that their machines are less expensive to own. That could affect Dell's position as the low-price leader, Gray said.

As for new products, Dell said its Axim handheld device had "sold quite well." The personal digital assistant exceeded expectations, but the company declined to say by how much. The company will also launch a new printer line "fairly shortly," Dell said. The PC maker said in September that it will release Dell-branded printers in the early part of this year.