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May 25, 1994


By CBR Staff Writer

After taking $26.3m in net charges against first quarter figures to cover further embarrassment in the money markets, Dell Computer Corp has finally decided to stick to what it knows and says it will avoid using derivatives for investment purposes in the future. The company took a $15.6m net charge related to interest-rate derivative instruments, and said its improvements in operations were not fully realised because of the investment-related charges. Tom Meredith, chief financial officer, said the company has now closed more than half its investment derivative portfolio and has taken steps to limit further exposure. The company will remove its derivative holdings in an orderly fashion over the next two quarters, Meredith said. The 14% increase in sales reflected strong demand for new products based on Intel Corp’s Pentium and Dell’s re-entry into the notebook computer market. Chairman and chief executive Michael Dell said the company is on track for developing new systems that could lead to increased profitability, but noted that Dell cut prices late in the first quarter to boost demand, and increased profits will depend on the pricing environment in the personal computer business and on the company’s ability to manage inventories during product transitions. In the first quarter, they represented 4.6 weeks of sales. He added that possible future exposure from investments in interest-rate derivatives is about $7m.

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