Dell Computer stormed ahead with a 170 per cent jump in fourth quarter operating income, on sales up 57 per cent. Despite industry whingeing that European business is underspending on IT, Dell?s European sales jumped by 34 per cent to $618 million in the quarter, and totalled just over $2 billion for the year.
Germany, cited by the rest of the IT industry as recessionary, showed a 48 per cent growth in revenue, topped by an impressive 62 per cent in France. Japan was similarly impressive, with 60 per cent revenue growth in the quarter, and a total of $476 million for the year. However, the overall sales growth was largely driven by US corporate deals.
Overall, Dell?s quarterly net income was $188 million, up from $77 million last time, and revenues rose sharply to $1.5 billion to $2.4 billion. For the full year, net rose to $518 million from $272 million. This is Dell?s third year of 80 per cent-plus growth, and revenues jumped by 47 per cent to $7.8 billion.
The company confounded analysts' expectations on profits per share. The smart money forecast a likely 83 cents per share, with the optimists talking of 97 cents. In fact, Dell chalked up a very healthy $1.01. Despite these strong results, the share price fell, closing at $72.125. If there is any bad news or cause for concern, it is in gross margins, slipping from 22.3 per cent to 21.7 per cent.
It is now eyeing the high end of the PC market, planning a further assault on Compaq, which maintains a solid leadership of the PC workstation market. At the low end, Dell says its Internet-driven business is booming, largely through increased sales to small businesses and consumers.
Michael Dell, chairman and CEO, commented that a direct business model continues to provide the company with significant advantages. Large investments are planned for Internet-based business, focusing primarily on consumer services rather than hardware. Over $1 million a day was generated from Internet sales in the fourth quarter alone.
Sales and profits aside, business processes improved rapidly, with received payments four days ahead of schedule, and significant improvements to inventory management. Operating expenses fell to 11.3 per cent from 12.3 per cent of sales, and the Internet should bring about further improvements in overheads because of the low cost of the sales medium.
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