Dell's Third-Quarter ReboundDell's Third-Quarter Rebound

Dell Computer rebounded from a money-losing second quarter to beat revised estimates for the third quarter and continue expanding its share of the market for PCs and servers. Company execs said they expect the number of units shipped to increase about 5% during the coming quarter, but that continually dropping component prices will result in only a slight increase in revenue, with earnings remaining relatively flat.

Dell's president and chief operating officer, Kevin Rollins, said during a conference call with the media that the company's average unit selling price dropped more than $50 during the quarter, to $1,800, and he doesn't expect that trend to reverse. But Rollins also expressed optimism for a recovery in IT spending over the next few quarters. "We think there still is the potential for a late spring, early summer uptick," he said. "But we don't have a lot of hard data to support that."

In a subsequent call with analysts, CEO Michael Dell was asked about Dell's research and development spending, which was $107 million during the third quarter, down from $126 million a year ago. Dell assured analysts that while the company will continue to cut costs where it makes sense--Dell has cut 5,700 jobs this year--it will also fund R & D as much as revenue growth allows. He stressed that the company will invest wherever necessary to maintain Dell's competitive position.

For the quarter ended Nov. 2, Dell reported a profit of $429 million, 16 cents, on revenue of $7.5 billion, compared with a profit of $674 million, 25 cents, on revenue of $8.3 billion for the same period last year. The company posted a loss of $101 million for the second quarter ended Aug. 3, largely due to a $742 million restructuring charge. Dell's geographic and product-line breakdowns looked similar to past quarters, with 70% of revenue generated in the Americas, 20% in Europe, and 10% in Asia-Pacific and Japan. Desktop PCs represented 52% of revenue, while portable computers and enterprise systems accounted for 29% and 19%, respectively. Dell also said its market share has grown from 20% to 26% over the past year, whereas the previous gain of six percentage points took two years to achieve.