Dell has turned in a blistering second quarter, with European growth three times greater than the computer industry as a whole.
But while analysts believe it will continue to grow healthily over the coming couple of years, many predict that it will have a tough time overtaking Compaq as number one PC maker.
The PC maker's total net profit rose by 72 per cent to $346 million or 50 cents per share, four cents better than Wall Street expected. Revenue growth was highest in Europe, at 73 per cent, well above the overall increase of 54 per cent to $4.3 billion. In depressed Asia-Pacific, revenues rose by 34 per cent.
Dell moved into number two spot in Europe in terms of unit shipments, although its business is still unusually US dependent, with well over half its revenue coming from the home territory.
The flourishing quarter boosted interim growth rates beyond the 50 per cent mark after a first quarter that, for Dell, showed relatively slow growth. Half year revenue was up 53 per cent to $8.25 billion with net profit up 58 per cent to $650 million.
Key products for the quarter were servers, up 141 per cent, and notebooks, up 84 per cent. Desktop PCs rose 42 per cent in revenue terms.
Now Dell faces tough decisions if it is to rise to the top of the PC league, claim industry watchers. While Joe Bankan of Dataquest was typical of analysts in saying "we're running out of reasons to tell people not to buy this stock", others were more cautious.
Phil Rueppel of BT Alex Brown pointed out at the analysts' briefing that, "mathematically, these figures are unsustainable."
Most analysts believe that, in order to hit the top spot, Dell must expand out of its US centric, large corporate base to increase sales to smaller companies. This is at a time when margins are squeezed and recession is threatening in those markets, and when rivals such as Compaq and IBM are attacking them with their own build to order programmes, based on Dell's.
Addressing the smaller companies market will mean being more price competitive - Dell PCs are still, on average, higher than those of rivals, although they have fallen from $2,500 to $2,350 in the past three months, and it has one of the highest margins in the industry at 22.7 per cent.
Expansion will also mean a massive rebranding, marketing and promotional campaign to a new base that is still more used to buying through dealers rather than from direct only vendors like Dell.
Dell will rely heavily on its Web sales to penetrate new markets. It claims to be selling an average of $6 million worth of goods via the Internet each day.
Chief executive Michael Dell pointed out that his company's growth was six times the worldwide industry rate, and that Dell accounted for more than half the total growth in PC unit shipments worldwide during the quarter.
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