Dell`s superior execution produces record shipments, revenue and operating income in Q2

Continued strong growth in servers and storage systems and in key global markets helped Dell achieve best-ever quarterly operating results in the period ended 1 August, and widen its overall global market-share lead.

Total product shipments in the company`s fiscal second-quarter 2004 were up 27% from one year ago, more than four times the growth for the rest of the industry. Dell server volumes rose at the same strong percentage rate.

Company shipments increased 46% in Asia-Pacific and Japan and 31% in Europe, the Middle East and Africa. Without Dell, growth in those regions was 6% and 12%, respectively. Second-quarter revenue was $9.8 billion, up 16% from the same period one year ago. Per-share earnings were 24c, an increase of 26%.

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"We`ve again shown Dell`s unique ability to profitably earn a larger share of business by focusing on standards-based technologies, managing costs and creating value for customers," said Kevin B Rollins, Dell`s president and chief operating officer. "We`ve done that regardless of the pace of industry demand and the appetite of others to generate sales, even at a loss."

Rollins said industry shipments in the third quarter would likely grow at a rate in the high single digits from one year ago, but that Dell expects its volumes to increase more than 25%. The company believes such growth would generate record company revenue of about $10.5 billion, a 15% increase from the prior year, and generate earnings per share of 26c, a 24% rise.

Second-quarter operating expenses were a record-low 9.6% of revenue, down from 9.8% in the first quarter and 9.9% a year ago. Operating profit as a percent of revenue increased to 8.6% - the company`s highest in nearly three years, and up from 8% in last year`s second quarter. Dell generated $740 million in cash from operations during the period. At the end of the quarter, cash and investments totalled $10.6 billion.

Dell`s second-quarter growth earned it nearly three points of additional global market share, and the company outpaced average industry growth in all regional markets and worldwide product categories.

In Asia-Pacific and Japan, shipments of Dell PowerEdge servers were up 40%, more than double the rate for other companies in the region. Dell Japan, the number three computer-systems supplier nationally, increased unit volumes 35%, while the rest of the industry declined 2%. The company gained three share points and accounted for more than 10% of industry shipments in Japan for the first time.

Respondents to a recent survey by a leading Japanese information-technology publication ranked Dell number one in customer satisfaction for standards-based servers for the fifth consecutive year.

Total volumes in China, another priority market for Dell, increased 71% -the third straight quarter of company growth in excess of 65%. Server shipments in that market were up 79% and notebook-computer volumes doubled.

Dell`s profitability in Europe, the Middle East and Africa (EMEA) was up almost 90%. The company`s quarterly performance was highlighted by combined server growth of 30% - nearly twice that of other companies-in the UK, France and Germany, all strategically important markets. Overall growth of 43% in the UK was almost four times the average for the rest of the industry.

In the US, Dell achieved a 23% increase in shipments-versus an average 2% for other companies - and industry - best profitability. Dell added two points to its number one US server share.

Dell shipments to US consumers increased 47% to 70% for notebook computers from the company`s Inspiron line. Growth in systems sold to small and medium businesses was up 30%. Company volumes in the Americas region outside of the US rose 30%, highlighted by a 73% gain in Mexico.

Dell`s 27% increase in second-quarter server shipments was eight points higher than the average server growth for other companies. Revenue from external storage systems was up 46% to an annual run rate of more than $1.5 billion.

Third-party opinions underscored Dell`s strength with customers in enterprise product categories. Technology Business Research Inc (TBR) ranked Dell number one in service and support for standards-based servers for eight consecutive quarters. InfoWorld, in its annual readers` choice awards, named a PowerEdge model "best server" and a PowerVault storage system "best enterprise storage product". The same report gave a Dell EMC entry-level storage array an overall "excellent" rating and a perfect score for management.

In desktop computers, Dell`s combined 25% growth in shipments of Dimension and OptiPlex systems countered an average 1% increase for others. The company also extended to 23 consecutive quarters its leadership of TBR`s study of satisfaction among corporate desktop-computer buyers. Additionally, PC Magazine gave Dell a grade of "A+" for service and reliability in desktop computers, marking the eighth straight time the company has earned an "A" or better.

Consistent with new accounting standards effective in the third quarter, Dell expects to begin consolidating operations of Dell Financial Services, the company`s US joint venture with CIT Group Inc, when it announces third-quarter results in November. The accounting change will not alter the company`s risk profile, and is expected to have no material effect on Dell`s operating results or financial position.