Improved profitability, global share gains highlight Dell`s Q4

Dell said its industry-best operating efficiency again helped the company simultaneously provide customers with exceptional value and achieve improved, leading operating profitability during the fiscal fourth quarter, which ended 1 February.

Analysts said Dell gained almost three points of worldwide market share in servers from the year-ago quarter, and more than five in the US.

The company significantly exceeded overall industry growth rates in strategically important markets such as China, Germany and Japan.

As anticipated, Dell reported quarterly net earnings of $456 million, or 17 cents per share, compared with $434 million, or 16 cents per share, last year. Excluding charges, year-ago per-share earnings were 18 cents. Revenue for the most recent period was $8.1 billion. Results exceeded original company guidance, primarily because of a stronger-than-planned performance by Dell`s profitable, fast-growing consumer business.

Full-year net earnings were $1.25 billion versus $2.18 billion in fiscal 2001. Absent charges, earnings for fiscal 2002 were $1.78 billion, or 65 cents per share.

NOTE: All subsequent financial information in this release excludes charges for fiscal 2002 and 2001.

(in millions, except share data) FY `02 FY `011 Change FY `023 FY `011,2 Change Revenue $8,061 $8,674 (7%) $31,168 $31,888 (2%) Operating Income $594 $589 1% $2,271 $2,768 (18%) Net Income $456 $508 (10%) $1,780 $2,310 (23%) Earnings Per Share $0.17 $0.18 (6%) $0.65 $0.84 (23%)

(1)     Q4 and full-year FY `01 income/earnings data exclude a $105 million charge related to job reductions and consolidation of facilities.

(2)     Full-year FY`01 income/earnings data exclude a $59 million after-tax charge related to the cumulative effect of an accounting change.

(3)     Full-year FY`02 income/earnings data exclude a $742 million second-quarter charge related to job reductions, consolidation of facilities and impairment of assets.

"As our industry moves into a new stage of consolidation, the opinions that still matter most belong to customers," said Michael Dell, the company`s chairman and chief executive officer. "The pace with which they`re choosing Dell products and services accelerated last year, and puts us in a stronger competitive position than at any time in our history."

Calendar 2001 was the first full year in which Dell led the global computer-systems industry, with nearly 14% market share. In the US, Dell`s full-year share exceeded 25%, up almost six points from 2000.

According to Mr Dell, the company expects to outperform the industry again in the first quarter of fiscal 2003. He said a seasonal drop in purchases of home computers combined with softness in demand by businesses suggest a 10-percent sequential decline in industry shipments. Dell believes its Q1 unit volumes and revenue will be down 3% to 5%, producing per-share earnings of 16 cents.

Dell continued to successfully deliver on its strategy to sequentially improve operating profitability despite challenging industry conditions. Net operating margins for the period were 7.4% of revenue versus 6.8% in the year-ago fourth quarter.

Operating expenses were 10.2% of revenue, the lowest level in company history.

Dell`s leading asset management helped generate more than $1 billion in cash from operations during Q4. Total cash and investments at the close of the period were $8.3 billion. Four days of supply in inventory matched the low achieved in the previous two quarters.

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Company shipments of enterprise systems grew 12% from the same quarter one year ago. Dell`s server volumes in Central and South America rose more than 50%; in Japan, the increase was 23%, more than three times the industry average.

Growth in shipments of PowerEdge servers worldwide and in the US defied industry server declines of 1% and 9%, respectively. Dell`s US server share in the quarter exceeded 28% and the company led that category for the fourth straight quarter. For the full year, worldwide company server shipments increased 27% while the industry, excluding Dell, fell 3%; company server units in the US rose 20%, even as industry totals dropped 10%.

Dell sold 69% more storage capacity during the quarter than in the year-ago quarter. External storage systems increased to 47% of the sales mix. Shipments of Dell Precision workstations, which already ranked number one globally and in the US, were up 21%.

Shipments of PowerConnect network switches expanded at a rapid pace as Dell customers increasingly capitalise on availability of standards-based switch technology, including high-speed gigabit Ethernet. PowerConnect switches, the first of which were introduced just five months ago, are designed especially for small and medium businesses and are currently sold in the US.

Combined unit volumes of Inspiron and Latitude notebook computers were up at twice the quarterly industry rate, and four times faster for all of last year.

Dell`s best geographic growth during the quarter was in Asia-Pacific and Japan, where shipments were up 19% in a market that dropped 6%. Volumes of the company`s enterprise-computing systems increased about 30% in both China and Japan. Full-year Dell shipments of all products in Asia-Pacific and Japan were up 37%; without Dell, the overall market was flat.

Shipments of Dell products in Europe, the Middle East and Africa (EMEA) increased 9% in the fourth quarter, even as overall industry volumes declined 5%. Crisp execution in Germany again achieved outstanding results: a 23% increase in shipments in a market that dropped 15%. In Germany, Dell workstation units were up 50%, those for notebook computers 46%.

Analysts said Dell`s full-year EMEA share reached 10%, moving the company from number three to number two in the region. In servers, the company`s unit growth of 29% last year was three times the industry average.

Dell`s total shipments in both the Americas and the US grew 10% in the fourth quarter; the US industry declined 9%. Dell`s Q4 US share of more than 27% was an industry record. For the full year, the company ranked number one in the overall US market and, for the first time, in all major product categories: servers, workstations, portable computers and desktop computers. Dell`s total unit growth in the US last year was 11%, compared with a national industry drop of 12%.

Unit volumes purchased by US government customers in the quarter jumped 28%, and shipments in the education segment increased 20%.

Company sales to consumers were particularly strong in the quarter, which includes the critical holiday purchasing season. Dell shipments to home customers were up 56% from the third quarter and were 38% better than one year ago. The strong performance is attributable in part to spending on a popular, consumer-focused US television campaign featuring the character "Steven". A youthful advocate for the company`s products, services and direct relationships with customers, Steven enthusiastically tells other characters and viewers, "Dude, you`re gettin` a Dell."