Customers selected Dell's standards-based computer products and services in increasing numbers in fiscal third-quarter 2003, pushing the company to record shipments and revenue and a higher rate of profitability.
In the process, customers again made Dell the world's leading supplier of computer systems. The company regained its position as the favourite computer company among U.S. consumers, and ranked No. 1 in all U.S. customer segments for the first time.
Dell's 28-percent year-over-year rise in overall product shipments compared with a 2-percent increase for the rest of the industry. Company server volumes were 24 percent higher, nearly five times the rate for the rest of the industry. Revenue from Dell enterprise products - servers, storage systems, network switches and workstations - was up a combined 27 percent.
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For the third quarter ended Nov. 1, total revenue was $9.1 billion, up 22 percent from last year in an industry where sales have otherwise been flat to down. Dell's earnings per share reached 21 cents, 31 percent higher. Company revenue and per-share earnings were consistent with increased guidance Dell provided Oct. 1. Dell has met or exceeded initial guidance to investors for seven consecutive quarters.
"The direction of customers toward standards-based computing is obvious," said Michael Dell, the company's chairman of the board and chief executive officer. "The reason is simple: customers get more flexibility, performance and reliability for their money with standards than from proprietary technology."
"Dell's obligation to customers is to innovate products and services that deliver great value, and our people are doing that with exceptional skill and efficiency."
Mr. Dell said fourth-quarter company shipments could increase 10 percent from the third quarter, or 23 percent from the year-ago period. Q4 revenue is expected to be up about 20 percent year-over-year, to nearly $9.7 billion. With anticipated further improvement in operating margins, the company expects fourth-quarter earnings per share of 23 cents, or 35 percent higher than last year.
In the third quarter, Dell again demonstrated solid balance between its long-time priorities of liquidity, profitability and growth. Operating expenses were 9.9 percent of revenue, equaling a company best. Cost reductions, an improved mix of products and services, and lower component costs contributed to an operating profit of $758 million, or 8.3 percent of revenue, up 39 percent from a year ago. That rate compares with 8.0 percent in the second quarter and 7.3 percent in the fiscal-2002 quarter, and was the company's highest in two years.
Dell generated $954 million in cash from operations in the quarter; total cash and investments totaled a record $9.1 billion at the end of the period.
PowerEdge Leads Trend Toward Supercomputing Clusters
Dell's third-quarter shipment growth outperformed industry averages in all product categories, including servers, as PowerEdge systems were chosen by customers for an expanding range of enterprise-class applications.
For example, deployment of standards-based Dell servers in supercomputing clusters running on the Windows or Linux operating systems, while relatively small, is increasing rapidly. Research by International Data Corp. showed the company was the leading provider of Linux-based server clusters during the first half of the year, with about 40 percent of the global market. This year alone, Dell has installed more than 200 clusters worldwide, nearly 90 percent of which replaced proprietary UNIX technology.
Sales of external storage systems increased 73 percent and continue on an annual run rate of more than $1 billion. Dell ranked second in a recent industry-analyst survey that asked corporate customers which suppliers they would consider for their storage-hardware purchases. During the quarter, Dell announced the Dell | EMC CX600, CX400 and CX200 storage systems, and said it would manufacture the entry-level CX200 product. In the first year of a partnership between the two companies, more than 1,500 customers purchased Dell | EMC storage systems.
Demand for related enterprise products and services grew strongly. Engagements by Dell Professional Services more than doubled year-over-year, as the company continued to expand its services capabilities. For instance, Dell's centers of expertise for storage-area networks help make it simpler for customers in every regional market to buy, deploy and operate such products.
Volumes of Dell Precision workstations increased 27 percent worldwide, 37 percent in the United States. Shipments of Inspiron and Latitude notebook computers were up 26 percent in the quarter, more than twice the rate of the rest of the industry.
Growth in Key Markets Highlights Global Strength
Shipments in four strategically important national markets - China, France, Germany and Japan - rose a combined 30 percent in the quarter, as Dell significantly outpaced the rest of the industry in every region.
Americas volumes were up 33 percent, higher still in Latin America, where shipments in Mexico more than doubled from one year ago. In the United States, shipments rose 33 percent; without Dell, volumes were up 2 percent. Systems sold to U.S. businesses grew 27 percent, while total shipments to government and education customers increased 26 percent, and those to consumers surged 51 percent.
Dell's 28-percent unit growth in Asia-Pacific and Japan was more than three times the rate of the rest of the industry. The competitive gap was similarly profound in servers: Dell volumes in the region rose 20 percent, versus an average 1 percent for others. Total company shipments were up 42 percent in China, and 35 percent in Japan.
Combined Dell shipments in Europe, the Middle East and Africa (EMEA) increased 13 percent; the industry without Dell was up 5 percent. The company's regional server growth was three times that of the rest of the industry, led by a 60-percent surge in Germany. Computer systems sold to consumers and small businesses in EMEA were 28 percent higher.
About Dell
Dell Computer Corporation (Nasdaq: DELL) 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 $33.7 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 at www.dell.com.
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Special note: Statements in this press release that relate to future results and events (including statements about fiscal fourth-quarter 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.
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