Dell Computer Corp, the PC direct sales pioneer, has its imitators (most recent among them being Steve Jobs’ slowly drowning Apple Computer Inc) but still nobody does it better. Net profits for the third quarter grew by 71% to $248m while revenues jumped 58% to $3.19bn and once again Wall Street’s consensus of estimates was beaten, this time by 4 pennies, as earnings cruised in at $0.69 per share. The biggest growth in the quarter came from Dell’s server and workstation business which pushed revenues up a claimed 340% to $293m (10% of all computer systems sold by the company). Dell is also stepping up its internet based sales operation which is selling a claimed $3m worth of products every single day, making it the biggest vendor on the web. Sales into the Americas grew 63% to $2.3bn or 72% of total quarterly revenues. European sales grew 45% to $700m or 22% of the total. Sales into Asia Pacific and Japan appeared, for now, to be undeterred by the region’s multitude of problems, growing 52%. Company founder and CEO Michael Dell called it a strong performance with his company claiming the US number two slot in PC unit shipments for the first time (based on Dataquest statistics) shunting aside Packard Bell NEC Inc but still trailing Compaq Computer Corp. Dell maintained its worldwide number three slot. One of the big advantages of Dell’s direct sales model is the reduced cost of holding excess inventory or stock. Compared to its $1.61bn of cash and short term investments on the balance sheet at quarter end, Dell held just $301m in stock. This is an incredible 11 days worth of sales (compared with Compaq Computer Corp’s $2.01bn or 15 days). Gross profit margin also squeezed up slightly in the quarter by 0.3% to 22.5% while operating expenses remained flat compared to the preceding three months.
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