Dell's Q1 Results Beat Company Revenue, Earnings Guidance, Highlighted by Growth in Enterprise Products, Record-Low OPEX
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Dell's Q1 Results Beat Company Revenue, Earnings Guidance, Highlighted by Growth in Enterprise Products, Record-Low OPEX

Company Expects Year-Over-Year Sales, EPS Increases in Second Quarter

AUSTIN, Texas--(BUSINESS WIRE)--May 16, 2002-- Dell (Nasdaq: DELL - News) further increased its appeal to enterprise computing customers and again demonstrated a unique ability to manage costs, en route to better-than-expected revenue and earnings per share for the fiscal first quarter, which ended May 3.

The company has met or exceeded its guidance to investors for five consecutive quarters, and expects to achieve year-over-year growth in both revenue and EPS in Q2.

Total first-quarter shipments of Dell standards-based servers, storage products and workstations jumped 16 percent. The company gained more than two points of server market share worldwide and three in the United States. Dell's U.S. server share reached 30 percent for the first time, as the company continued to lead that strategically important market category even after recent industry consolidation.

At the same time, Dell further enhanced the efficiency of its customer-focused direct business model, driving operating expenses as a percent of revenue below 10 percent for the first time in company history.

(in millions, except per-share data) Q1 FY'03    Q1 FY'02    Change
                                     --------    --------    ------

Revenue                               $8,066      $8,028        --
Operating Income                        $590        $588        --
Net Income                              $457        $462        (1%)
Earnings Per Share                     $0.17       $0.17        --

Dell reported first-quarter net earnings of $457 million, or 17 cents per share, on revenue of $8.1 billion. Those numbers were higher than guidance provided on April 3, when Dell said revenue could reach $7.9 billion and per-share earnings 16 cents. Results for the period were essentially identical to those for the first quarter one year ago.

"Our objectives are simple and unchanged: to further reduce costs; to deliver great value to customers, particularly enterprise customers; and to profitably gain market share," said Kevin B. Rollins, Dell's president and chief operating officer. "We're continuing to make good on all three commitments."

Mr. Rollins said Dell currently anticipates second-quarter industry unit shipments will be off about 5 percent from the first quarter, consistent with historical seasonal patterns, and that revenue will drop at a larger rate. However, he said Dell's Q2 revenue could be up 8 percent year-over-year to $8.2 billion, with higher operating margin producing per-share earnings of about 18 cents.

Operating profit as a percent of revenue in the most recent quarter was relatively stable sequentially, despite moderation in the rate of component-cost declines. Dell's operating margin of 7.3 percent was equal to the year-ago level. Operating expenses fell to 9.9 percent of revenue, a record low for the company and down from 10.7 percent in last year's first quarter.

Mr. Rollins said Dell is on track or ahead of plans for further cost reductions in four critical areas: product design, manufacturing/distribution, operating expenses and warranty costs. In total, the company believes it can reduce costs by more than $1 billion in fiscal 2003, with larger portions of that improvement occurring during subsequent quarters.

Cash and investments at the end of the quarter totaled $8.2 billion, as Dell generated nearly $600 million in cash from operations. Inventory was nearly 20 percent lower than a year ago period, when revenue was virtually the same.

Continued Benefit From Trend Toward Enterprise Standards

Dell's worldwide product shipments rose 13 percent in the first quarter; without the company, industry volumes dropped 5 percent. The company gained more than two points of global market share.

Increasing customer preference for standards-based technology contributed to Dell's notable growth in total shipments of enterprise products. Volumes of the company's PowerEdge servers increased 10 percent; minus Dell, server shipments were flat versus one year ago. Dell's worldwide server share exceeded 20 percent for the first time, and the company gained three share points in the United States.

The company expanded its server offerings this past quarter with the introduction of several new systems including the 1655MC, a high-performance blade product that accommodates up to six, two-processor servers in each unit; four-processor PowerEdge 6600 and 6650 servers for corporate data centers and applications requiring greater computing power; and the PowerEdge 2650, a powerful, rack-based server ideal for high-performance computing clusters, storage-area networks and small-scale department database applications.

Total storage capacity shipped by Dell during the quarter increased nearly 70 percent from one year ago. External systems grew to 49 percent of company storage revenue. Storage sales were up more than 20 percent sequentially and current demand suggests a higher rate of growth from Q1 to Q2. The category is both Dell's fastest growing and most profitable as a percent of revenue.

The company's PowerConnect network switches, designed especially for small and medium businesses and currently sold in the U.S., continue to rapidly gain customer acceptance. Shipments of Dell Precision workstations rose 25 percent worldwide, even faster in the U.S.

Results of a new survey illustrate forces driving the ongoing shift of enterprise customers toward higher value from standards-based systems and services. Seventy-two percent of nearly 300 information-technology (IT) decision makers at U.S. businesses said return on investment was of "high importance" in allocating IT spending, and 95 percent called current measures of value inadequate. In response to customer demand for a viable method of measuring value, Dell has created and is introducing special tools designed to help customers assess the return on investment for critical server and storage consolidation projects.

Company Units Up, Industry Down in Regional Markets

Dell achieved 17-percent first-quarter growth in product shipments and a 3-percent increase in revenue in the United States. Without Dell, U.S. industry volumes declined 10 percent. The company's share of the world's largest market was five points higher than one year ago. Notwithstanding recent industry consolidation, Dell leads the U.S. market in all major product categories -- servers, workstations, and notebook and desktop computers.

Revenue from U.S. consumers remained strong in the period, rising 26 percent from a year ago; combined sales to U.S. education and government customers were up 16 percent.

In Asia-Pacific and Japan, Dell's shipments grew 8 percent; absent the company, industry volumes dropped 6 percent. Similarly, Dell server units in Japan were up 10 percent; excluding the company, server volumes fell 4 percent. Dell posted double-digit unit growth and higher revenue in China, Australia and New Zealand.

The company also outperformed the industry in Europe, the Middle East and Africa (EMEA). Dell product shipments in the region increased 5 percent overall and 8 percent in servers from year-ago levels; the balance of the industry was off 6 percent and 8 percent, respectively. The company sustained momentum in Germany, as shipments climbed 19 percent -- the industry was down 4 percent without Dell -- and revenue rose 9 percent.

About Dell

Dell Computer Corporation (Nasdaq: DELL - News), the world's most preferred computer systems company, is a premier provider of products and services required for customers worldwide to build their information-technology and Internet infrastructures. The company's revenue for the past four quarters totaled $31.2 billion. Dell, through its direct business model, designs, manufactures and customizes products and services to customer requirements, and offers an extensive selection of software and peripherals. Information on Dell and its products can be obtained on the World Wide Web at

Dell, PowerEdge, PowerConnect and Dell Precision are trademarks of Dell Computer Corporation.

Dell disclaims any proprietary interest in the marks and names of others.

Special note: Statements in this press release that relate to future results and events (including statements about future financial and operating performance) are based on the company's current expectations. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, including general economic and business conditions; the level of demand for the company's products and services; the level and intensity of competition in the technology industry and the pricing pressures that have resulted; the company's ability to timely and effectively manage periodic product transitions, as well as component availability and cost; the company's ability to develop new products based on new or evolving technology and the market's acceptance of those products; the company's ability to manage its inventory levels to minimize excess inventory, declining inventory values and obsolescence; the product, customer and geographic sales mix of any particular period; and the company's ability to effectively manage its operating costs. Additional discussion of these and other factors affecting the company's business and prospects is contained in the company's periodic filings with the Securities and Exchange Commission.

Consolidated statements of income and financial position follow.

                       DELL COMPUTER CORPORATION
            Condensed Consolidated Statement of Operations
                   and Related Financial Highlights
                 (in millions, except per share data)

                         Three Months Ended
                     --------------------------      % Growth Rates
                     May 3,    Feb. 1,   May 4,  ---------------------
                      2002      2002      2001   Sequential Yr. to Yr.
                     ------    ------    ------  ---------------------
Net revenue          $8,066    $8,061    $8,028      0.1%       0.5%
Cost of revenue       6,675     6,645     6,580      0.4%       1.4%
                     ------    ------    ------
 Gross margin         1,391     1,416     1,448     (1.7%)     (3.9%)
Selling, general
 and administrative     691       713       737     (3.1%)     (6.2%)
Research, development
 and engineering        110       109       123      1.3%     (11.1%)
                     ------    ------    ------
 Total operating
  expenses              801       822       860     (2.5%)     (6.9%)
                     ------    ------    ------
Operating income        590       594       588     (0.6%)      0.4%
Investment and other
 income, net             48        40        58     22.8%     (17.7%)
                     ------    ------    ------
Income before
 income taxes           638       634       646      0.8%      (1.3%)
Income tax provision    181       178       184      2.6%      (1.3%)
                     ------    ------    ------
 Net income          $  457    $  456    $  462      0.1%      (1.3%)
                     ======    ======    ======

Earnings per common share:

 Basic               $ 0.18    $ 0.18    $ 0.18
                     ======    ======    ======
 Diluted             $ 0.17    $ 0.17    $ 0.17
                     ======    ======    ======

Weighted average shares outstanding:

 Basic                2,595     2,599     2,600
 Diluted              2,672     2,690     2,757

Percentage of Net Revenue:
Gross margin           17.2%     17.6%     18.0%
Selling, general and
 administrative         8.5%      8.9%      9.2%
Research, development
 and engineering        1.4%      1.3%      1.5%
Total operating
 expenses               9.9%     10.2%     10.7%
Operating income        7.3%      7.4%      7.3%
Income before
 income taxes           7.9%      7.9%      8.0%
 Net income             5.7%      5.7%      5.8%
Income tax rate        28.5%     28.0%     28.5%

Net Revenue by Geographic Region:
% of Total Revenue
Americas                 69%       70%       68%
Europe                   21%       21%       22%
Asia Pacific - Japan     10%        9%       10%

Net Revenue by Product Line:
% of Total Revenue
Desktops                 54%       57%       51%
Enterprise               19%       18%       19%
Portables                27%       25%       30%

Note: Percentage growth rates and ratios are calculated based on
underlying data in thousands.

                       DELL COMPUTER CORPORATION
        Condensed Consolidated Statement of Financial Position
                   and Related Financial Highlights
      (in millions, except for "Ratios" and "Other Information")

                               May 3,   Feb. 1,    May 4,
                                2002      2002      2001
                              -------   -------   -------
Current assets:
 Cash and cash equivalents    $ 3,617   $ 3,641   $ 4,886
 Short term investments           343       273       381
 Accounts receivable, net       2,308     2,269     2,281
 Inventories, net                 284       278       350
 Other                          1,286     1,416     1,554
                              -------   -------   -------
  Total current assets          7,838     7,877     9,452
Property, plant
 and equipment, net               834       826       924
Investments                     4,234     4,373     2,667
Other non-current assets          410       459       427
                              -------   -------   -------
  Total assets                $13,316   $13,535   $13,470
                              =======   =======   =======

Liabilities and Stockholders' Equity:
Current liabilities:
 Accounts payable             $ 5,062   $ 5,075   $ 4,326
 Accrued and other              2,345     2,444     2,346
                              -------   -------   -------
  Total current liabilities     7,407     7,519     6,672
Long term debt                    520       520       508
Other                             868       802       785
                              -------   -------   -------
  Total liabilities             8,795     8,841     7,965
Stockholders' equity            4,521     4,694     5,505
                              -------   -------   -------
Total liabilities and
 stockholders' equity         $13,316   $13,535   $13,470
                              =======   =======   =======

Quick ratio                      0.85      0.82      1.13
Days supply in inventory            4         4         5
Days of sales
 in accounts receivable            30        29        30
Days in accounts payable           68        69        59

Other Information:
Headcount (approximate)        34,800    34,600    38,300
Average total
 revenue/unit (approximate)   $ 1,770   $ 1,700   $ 2,000

Note: Ratios are calculated based on underlying data in thousands.

     Dell Computer Corporation, Austin
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