Dell optimism fuelled by storage

Dell Computer yesterday increased its revenue forecast for the current quarter based partly on strong sales of servers and storage systems.

The Texas-based company now expects revenue for the quarter ended 1 November to reach $9.1bn, which would represent a 22 per cent gain from the same period last year. Previously, the direct seller of PCs and other hardware expected revenue to reach $8.9bn.

Per-share earnings are expected to be 21 cents, at the high end of the company's previous guidance and more than 30 per cent better than last year's third-quarter results.

CEO Michael Dell attributed the predicted gains to a shift in corporate buying patterns that favour Dell, as well as the company's own cost-cutting program.

"The customer trend toward standards is unmistakable and has been going on almost as long as there's been information technology," Dell said in a statement. "The movement is accelerating and reaching deeply into enterprise computing, because standards-based products and services are flexible, scalable and simple, and offer great value."

Dell added that the company cut costs by more than $1bn this year, primarily in areas such as product design; manufacturing and logistics; operating expenses; and warranty costs.

Dell's announcement may lift investor sentiment for the moment, but it's not evidence of a PC market recovery, at least not yet, analysts said.

"It's more evidence of Dell continuing to gain market share against competitors than it is of the overall health of the PC market," IDC analyst Roger Kay said. "Whatever upside there is, Dell is capturing it."

Dell's third-quarter surge could mean the company has reclaimed the PC sales crown. Dell had been the number one PC seller in the world before the merger of Hewlett Packard and Compaq.

But, as previously reported, Dell became a close second to a newly merged HP during the second quarter. Though HP's share declined before the end of the quarter, the company held on to the number one spot, with 15.5 per cent of the worldwide PC market. Dell gained some, capturing 14.9 per cent of the worldwide market.
Preliminary third-quarter market share numbers from Gartner and IDC should appear in two to three weeks.

Scott Ard and John G. Spooner write for News.com