Dell's profits soar on direct mode

Dell's profits soar on direct mode

Dell Computer announced last week that second-quarter profits had soared 58 per cent from a year ago, to 19 cents per share, while the PC maker saw its online sales reach $US30 million per day during the last month of the quarter.

Revenues for the period, ended July 30, totaled $US6.1 billion, up 42 per cent from $4.3 billion a year ago. Net income increased 47 per cent year-over-year, to $507 million, up from $346 million a year ago, Dell said.

The results beat the expectations of 30 brokers polled by First Call who expected the company to post a profit of 17 cents per share.

Dell's consumer shipments grew more than 100 per cent in the quarter, and about one-half of those sales were generated online through the company's home page, Michael Dell, the company's chairman and chief executive officer, said in a statement.

"We are now the largest direct company within the worldwide home and small-business market, and are significantly more profitable in that space than our nearest direct competitor," Dell said in the statement, apparently referring to rival Gateway 2000.

Both Dell and Gateway have successfully exploited the Internet as a way to sell computers directly to customers, helping to reduce sales and distribution costs at a time when margins in the PC business are dwindling fast.

Dell's computer shipments grew 55 per cent, or double analyst estimates for the industry as a whole, according to Dell. Business was strongest in the home and small business markets, where sales grew 67 per cent from the prior quarter.

The company derives more than 60 per cent of its revenues from desktop sales, although it managed to grow both its server and workstation businesses in the past year. Revenues from those businesses, which Dell lumps together with storage products, grew 85 per cent year-over-year, to account for 16 per cent of revenues.

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