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Dell banks on non-PC business for profit boost
And woos foreign customers...

By Michael Singer

Published: Friday 12 August 2005

Top computer maker Dell is beginning to see even more promise beyond the United States and the PC.

Sales of storage systems, mobility products, enhanced services and software and peripherals helped the computer maker augment profits from its PC business in the second quarter, the company said on Thursday.

In the three months ended 31 July, Dell had earnings of $1.02bn, or 41 cents per share, up 32 per cent from a year ago. Revenue for the quarter was $13.4bn, 15 per cent higher than in the same period last year.

Analysts polled by Thomson First Call predicted that the number one US computer maker would post profits of 38 cents per share on sales of $13.71bn. At the same time last year, Dell announced profits of 31 cents per share on sales of $11.71bn.

PCs, which Dell started selling 10 years ago, are the company's bread and butter. PC shipments have been growing incrementally but prices have been falling steadily over the year. Dell has been at the forefront of online fire sales, where customers can order desktop computers without a monitor for less than $300.

Despite the second quarter's increase in PC sales, Kevin Rollins, Dell's chief executive officer, was cautious.

"While average selling prices were down more than we would have liked, we focused on balanced profitability and, in the process, delivered to our guidance for EPS [earnings per share]," Rollins said in a statement.

Last month, Rollins said Dell has the potential to be an $80bn company in the next three to four years.

The pricing wars are a double-edged sword for Dell, which has to keep pressure on the next two biggest PC makers. Number two PC seller HP reports quarterly profits next week. Number three player and IBM PC division beneficiary Lenovo reported profit of $45.9m on Wednesday.

Still, Dell said it managed to ship 9.1 million computer systems, including 2.7 million portable computer products (such as laptops and its Axim PDAs) in the second quarter. The company said it also made more than $2bn from its software and peripheral products such as printers and displays.

Though Dell enjoys great success in the United States, the company ranks second behind HP in overseas sales. Dell currently averages $135.2m in revenues per day, Rollins said last month.

Now, the CEO also said he expects about 55 per cent of Dell's growth in the next four years to come from outside the Americas.

As for the next three months, Rollins said corporate customers, the back-to-school buying season and continued growth in markets outside of the United States will drive Dell's third-quarter business.

The company is preparing to launch a new line of high-end computers, displays and televisions to appeal to customers in need of that luxury computing experience.

The company expects its revenue in the third quarter to hit somewhere between $14.1bn and $14.5bn, and predicts profits per share of 39 to 41 cents. Dell also announced plans to repurchase at least $1.2bn in stock during the current fiscal quarter. Dell's shares closed at $39.58, down 15 cents.

Michael Singer writes for CNET News.com