Top 4th of July Sales Best Phones Under $500 Palmetto Solar Review Early Prime Day Deals 8 Budget Chromebooks 4th of July Sale at Best Buy Travel Must-Haves Under $50 Best Android VPNs

Dell eyes shipment milestone

Dell is flying high as it races toward a new shipment milestone, continues to sell lines of highly profitable computers, and makes strides internationally.

In an industry fraught with turmoil, Dell Computer continues to do well as it races toward a new shipment milestone, selling lines of highly profitable computers and making strides internationally.

The company is on track for 2 million sales this quarter, according to various estimates, a torrid growth rate that is partly being fueled by $6 million per day in transactions over the Internet. Dell reached the 1 million quarterly sale plateau in June 1997, almost a decade after going public.

Wall Street's faith in the company seems exemplified by Dell's stock price. During the recent stock market turmoil, the PC maker slid 18 points from a near historical high. But accounting for an intervening split, it is now back to where it started.

Continuing strong sales and financial performance for the Texas company come as a result of a confluence of factors. International customers, for instance, are increasingly becoming more comfortable with the direct buying model.

European sales rose 73 percent in the second quarter, while growth is still coming in the economically troubled regions of Latin America and Asia. The company's shipments grew five times faster than the market rate during the second quarter, according to various estimates.

Also, in the Japanese market--the second-largest in the world--Dell continues to excel, according Takahiko Umeyama, a PC analyst at International Data Corporation. This is despite initial expectations that Japanese PC buyers would not take to a direct sales model.

Dell is also feeling the effects of PC price erosion less than other vendors because the company mostly targets the performance end of the market. The manufacturer's hottest-selling computers contain a 400-MHz Pentium II processor and a 19-inch screen, according to Ashok Kumar, an analyst with Piper Jaffray. The most popular machines from rival Gateway, by contrast, are lower-priced units based around the 333-MHz Celeron chip.

Consumer purchases also will likely boost sales higher, others added.

"This Christmas, it's better to be a higher-end guy because there are more applications that require processor power," said David Wu, an analyst at investment bank ABN AMRO.

Kurt King, an analyst with NationsBanc Montgomery Securities, expects Dell to grow rapidly internationally, despite the economic turmoil in Asia, based largely on the strength of its server line.

In addition, King said the company's management can't be ignored. Like rival Compaq, the financial results for Dell can't be explained by external factors. "In explaining the performance of these stocks, a statistical analysis shows that company-specific factors matter far more than industry-specific factors," he said.

Kumar, who has given the company a "strong buy" rating, also expects Dell's profit margins to increase in the coming months because the company has been able to take advantage of drops in component cost reductions.

Dell's component prices continue to fall faster than sales prices and Internet sales are increasing at a significant rate, analysts say.

"While [average selling prices] were down 3 percent sequentially and 11 percent year over year in the July quarter, we expect component cost decline to have a steeper slope, which should have a positive impact on margins," Kumar wrote in a report this week. Further, Dell has whittled its supplier base down from hundreds of vendors to fewer than 25 companies, and because of its long-term contracts with those component suppliers, "Dell has the pricing leverage," he said.

Western Europe will continue to be a strong growth region for the company, he said.

Meanwhile, Dell's Internet-based sales are on the rise and the company recently introduced a secure online transaction guarantee, promising to reimburse customers for credit card fines if a fraudulent charge occurs on the Dell Web site. "This new guarantee strengthens its leadership position," Kumar said.

Dell spokesman Dwayne Cox said the company does about $6 million in sales each day on the Internet--up from $1 million per day in March 1997--and "the goal is to, by the end of year 2000, be doing half of our business online."

Dell's Internet sales currently account for 11 percent of total sales, Cox said.