The company says earnings in its fourth quarter will also be stronger thanks to increased demand for its computers and growth in its consumer business.
The company now anticipates quarterly sales of about $8 billion, up from predictions of $7.6 billion. Earnings are expected to be 17 cents per share, compared with the outlook of 16 cents per share that Dell had given previously. The consensus estimate, according to First Call, was for Dell to earn 16 cents per share on sales of $7.65 billion.
The surprisingly strong revenue figure from Dell, which cited stable profit margins as a reason for the earnings revision, comes from better-than-expected consumer demand for PCs and its ability to win market share worldwide.
Dell was the only top-five computer maker to increase its market share in the fourth quarter, according to market research firm IDC. Its market share rose from 11.7 percent in 2000 to 14.1 percent in 2001, according to IDC.
Dell said its consumer business will achieve a sequential increase in product shipments of about 50 percent in the fourth quarter from the third quarter, and revenue growth of about 40 percent.
Though PC demand has improved slightly, Dell's gains are still impressive considering an overall slump in PC shipments worldwide.
The fourth-quarter jump in consumer demand helped lift competitors as well. Compaq Computer posted a smaller fourth-quarter loss in its Access Business Group--responsible for its PC business--than in the third quarter. It is also likely that better fourth-quarter consumer sales, which include a new trend toward more high-end PCs, will benefit Hewlett-Packard, which has a large retail presence. Gateway should benefit in the same way.
Analysts said it isn't just the consumer business that's doing well. "We suspect there was very good strength on the enterprise side as well, although it was not articulated in the press release," Merrill Lynch analyst Steven Fortuna said. Dell has put increased emphasis on efforts to build its storage business this year.
Dell will announce its final fourth-quarter results and give projections on the first quarter of 2003 on Feb. 14. Wall Street expects the company's first-quarter earnings to come in at 16 cents per share, according to First Call. Revenue is expected to be down slightly, to $7.57 billion.
News.com's John Spooner contributed to this report.