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August 15, 1996


By CBR Staff Writer

Personal computer stocks jumped on Wall Street yesterday after Dell Computer Corp demonstrated that not all manufacturers are finding life impossible in current markets. Dell shares led the way, rising $4.375 to $61, but Compaq Computer Corp, whose most recent quarter showed a dramatic slowdown, put on $2 at $58.25, which may represent misreading of the situation if Dell has simply got its marketing more right than its rivals, and is growing at their expense. And the figures were stunning: compared with Compaq’s growth of just 14% in the most recent quarter, Dell put on 40%, and just about alone among personal computer manufacturers, saw only a marginal decline in growth compared with the fiscal first quarter. The company therefore easily exceeded optimistic Wall Street forecasts, leading chairman Michael Dell to exult We’re having fun, as he attributed the strong results to a combination of rapidly falling memory chip prices and low inventory. The company had just 14 days of inventory last quarter, which means that parts that were bought at current low prices go straight into machines on the Dell build-to-order model, instead of having a lot of inventory bought at higher prices on its hands. Nobody expects component prices to fall as swiftly in the second half as they did in the first half. At $1.05, Dell handsomely beat the First Call average estimate of 91 cents a share, despite taking an extraordinary charge of 10 cents a share to repay some of its its senior notes.

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