Dell Reports $6.8 Billion in Revenue, Per-Share Earnings of 16 Cents; Continued Growth in Internet Infrastructure Sales, Nonsystem Revenue Highlight Fiscal Q4 - Company Financial Information

Edge: Work-Group Computing Report, Feb 14, 2000

Dell Computer Corporation (Nasdaq:DELL) reported that worldwide product shipments grew at more than double the industry rate in its fiscal fourth quarter, which ended Jan. 28.

Sales of enterprise-class products were sharply higher in the period, as Dell continued to establish itself as the industry's Internet infrastructure company.

Dell said net revenue for the quarter grew 31 percent, to $6.8 billion. Fourth-quarter net earnings increased to $436 million, or 16 cents per share. For the full year, net revenue was $25.3 billion, up 38 percent. Absent a charge associated with the purchase of ConvergeNet Technologies Inc., fiscal 2000 net income totaled $1.9 billion, or 68 cents per share.

The full-year results maintained Dell's position as the industry's fastest-growing and most profitable company.

                                        Fourth Quarter
(in millions, except share data)   FY '00   FY '99   Change
                                   ------   ------   ------
Revenue                            $6,801   $5,173      31%
Operating Income                     $513     $595     (14%)
Net Income                           $436     $425       3%
Earnings Per Share                  $0.16    $0.15       7%

                                         Full Year(a)
(in millions, except share data)   FY '00   FY '99   Change
                                   ------   ------   ------
Revenue                           $25,265  $18,243      38%
Operating Income                   $2,457   $2,046      20%
Net Income                         $1,860   $1,460      27%
Earnings Per Share                  $0.68    $0.53      28%

(a)  Full-year FY '00 income/earnings data exclude a $194 million
  charge for purchased in-process research and development related
  to the acquisition of ConvergeNet Technologies Inc.

Dell had announced on Jan. 26 that fourth-quarter revenue and earnings would be affected by an inconsistent flow of key semiconductor components, and a slower-than-anticipated rebound in sales to corporate and institutional customers following the Y2K rollover. The effects of those issues were evident in key operating ratios. Operating expenses were 11.6 percent of revenue in the most recent quarter, up from 11.0 percent in the year-ago period. Net income as a percent of revenue was 6.4 percent, down from 8.2 percent.

Dell used a portion of $835 million in cash from operations during the quarter to repurchase seven million shares of its common stock. The company ended the period with $6.9 billion in cash and investments, more than double the level from the prior year.

A sustained focus on asset management helped Dell achieve a return on invested capital of 281 percent for the second straight quarter. Dell had six days of inventory as it closed the period.

Sales through dell.com reached nearly 50 percent of revenue and averaged $40 million per day -- up from $14 million a year ago -- by the end of the quarter. Further, Chairman and Chief Executive Officer Michael Dell said selling online represents only a fraction of what the Internet means to the company today and in the future.

"Customers are increasingly demanding the type of direct relationship we pioneered in this industry, and the Internet is enhancing that preference," said Mr. Dell. "They're insisting on the efficiency and value of our direct Internet business model, and we believe we're widening our fundamental competitive advantage in the process.

"Analysts estimate that U.S. companies alone will spend $200 billion annually on their Internet infrastructures by 2003, a sizeable portion of which will be for server and storage hardware. That trend plays directly to our strength as the No. 2 and fastest-growing major provider of servers in the United States and the world."

Earlier this week, Dell announced the formation of an Americas sales division dedicated to the unique data-center needs of a large and rapidly growing number of 'dot-com' companies, Internet-service providers, and Web- and application-hosting companies.

"We already have more than 5,000 active customers in that part of the market," Mr. Dell said. "Twenty-five percent of Dell sales to these companies are servers and storage products, and many of the largest of these customers are allocating half of their spending with us to enterprise systems."

He added that the company's massive online presence, which runs entirely on Dell products, creates tremendous credibility with customers.

"In our view, we are becoming the preferred Internet infrastructure company to businesses large and small," said Mr. Dell.

Dell increased revenue and profitability through sales outside of the core computer systems business. Worldwide services revenue exceeded $490 million in the fourth quarter, more than 50 percent higher than the year-ago period. Other beyond-the-box sales -- including software and peripherals through Gigabuys and DellWare, and the Dellnet Internet service -- grew by nearly one-third, to more than $610 million. Total nonsystem sales accounted for 16 percent of revenue in the period.