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Dell Profits Rise 47 Percent

August 18, 1999

AUSTIN, Texas (AP) _ Dell Computer Corp. reported a 47 percent increase in second-quarter profits, helped by a 67 percent increase in sales to small businesses and consumers.

Dell, the largest seller of computers directly to customers, said it earned $507 million, or 19 cents per share, in the quarter that ended July 30. That was up from a profit of $346 million, or 12 cents a share in the same period last year.

Revenues rose 42 percent to $6.14 billion from $4.33 billion.

The profit beat the 17 cents per share expected by financial analysts surveyed by First Call/Thomson Financial. The results were released after the close of financial markets Tuesday.

Dell’s upbeat results were in sharp contrast to archrival Compaq Computer Corp., which posted a $184 million quarterly loss last month as it lost sales to Dell.

Dell’s growth in the home user market probably has affected several competitors, particularly Hewlett-Packard Co. and Compaq, which depend on retail sales, said Lou Mazzucchelli, senior vice president of the New York investment house Gerard Klauer Mattison.

``The direct (sales) model is steadily encroaching on the retail market,″ Mazzucchelli said.

Gateway Inc., another direct seller of PCs, probably also has been affected but not as deeply, he said. Gateway Inc. recently reported a 47 percent increase in second quarter earnings.

Dell, based in Round Rock, Texas, has set a scorching industry pace with its unconventional tactic of selling machines directly to customers and cutting out the retailers and distributors who can drive up prices.

The company’s overseas sales also continued to grow. Dell said it now ranks first in PC shipments within the United Kingdom and that revenue in France increased 55 percent.

``So far it looks like their business model continues to work for them,″ said Mazzucchelli. ``They are blessed with overall good demand.″

In the six months that ended July 30, Dell said it earned $941 million, or 34 cents a share. That was up from a profit of $650 million, or 23 cents a share, in the year-ago period. Revenue rose to $11.68 billion from $8.25 billion.

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