Dell shares drop on earnings decline

Dell Computer's stock slides after posting net earnings of $289 million, a 17 percent decline over year-ago results.

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Dell Computer's stock slid after the computer maker yesterday posted quarterly net earnings that declined compared to year-ago results, as increased component and acquisition costs forced the company to revise earnings expectations during the quarter.

Dell shares closed down 1.69 to 41.75, down 3.88 percent.

In its third fiscal quarter for 2000, Dell matched analysts' lowered expectations by reporting earnings of 18 cents per share, excluding acquisition costs, compared to 14 cents per share for the same period a year ago.

Including costs related to the acquisition of ConvergeNet Technologies during the quarter, Dell said net earnings totaled $289 million, or 11 cents per share, a decline of 25 percent over the same period a year ago.

Earnings were down sequentially, as well. Dell earned $483 million before charges, an increase of 26 percent over year-ago results but lower than the net earnings of $507 million it earned for its fiscal second quarter 2000.

For its third fiscal quarter ended October 29, the company was expected to report earnings of 18 cents per share, according to a consensus estimate from First Call.

Revenue grew 41 percent to $6.78 billion for the quarter compared to year-ago results of $4.8 billion, the company said.

Dell chief financial officer Tom Meredith said costs are no longer rising the way they did in the third quarter and that component availability should improve in the upcoming quarter. That should translate into improved profitability, he suggested.

"It's certainly not been a disastrous year, Tim Ghriskey, a portfolio manager for Dreyfus Corporation, told Bloomberg. "But when you look at some of the dot-coms and other technology issues, it's underperforming them."

In October, the company lowered earnings expectations for its third fiscal quarter because of another surge in memory prices. The company was stung because it keeps relatively low inventories, it said. As a result, Dell saw an increase of nearly $75 in the manufacturing cost of roughly one-third of all computers it makes, the company said.

Dell also was hurt by the delay of chipsets that would have allowed the company to start selling more expensive computers with Rambus-style memory, which is largely made outside of Taiwan, analysts said.

Revenue is not growing as fast as units shipped because of price declines, but Dell is still outpacing the industry, analysts said.

Sales of servers, workstations, and data-storage equipment surged 72 percent in the quarter. Dell can also point to the fact that it surpassed Compaq Computer to become the No. 1 PC maker in the United States for the first time.