Dell shares slip despite profit rise

SHARES in computer maker Dell slipped by more than 5% in early trading yesterday even though it posted better-than-expected fourth-quarter profits.

The company, which employs 5,000 people in Ireland, said profits in the final three months of 2005 grew by 52%.

However, the shares were down on comments by the company that revenue was not growing as fast as expected. A number of analysts cut their earnings forecast for the company.

“The guidance for the April quarter is disappointing,” said Cindy Shaw, an analyst at Moors & Cabot Capital Markets who has a “hold” rating on the stock.

“It suggests that revenue growth will slow further.”

Dell said net income rose to $1.01 billion (€850m) from $667m (€559m) a year earlier.

Revenue rose 12.8% to $15.2bn (€12.74bn) from $13.5bn (€11.31bn).

Dell’s fiscal fourth quarter had 14 weeks, one more week than the typical 13, adding a greater-than-expected 2% to 3% to revenue growth, chief executive Kevin Rollins said.

Dell reported adjusted earnings per share of 43 cents, two cents ahead of the analysts’ consensus. Wall Street expected revenue of $14.8bn (€12.4bn).

“A lot of the higher-margin products are doing well,” said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

But Goldman Sachs & Co analyst Laura Conigliaro wrote in a note that it seemed “Dell’s model is still undergoing major adjustment”, since earnings per share in the quarter were boosted by a lower tax rate and lower share count. Profit margins fell slightly.

Mr Rollins has been trying to stem a slide in revenue growth after Dell lowered prices on entry-level consumer computers last year and twice missed analysts’ revenue forecasts.

Dell increased its percentage of international revenue by 10% year-to-year, to a record 43% of total fiscal fourth-quarter revenue. Non-US sales rose 3% from the previous quarter.

Sales to businesses, which account for about 5% of Dell’s revenue, grew 21%, including a 41% surge in revenue from data storage products, Dell said.

Dell forecast per-share earnings for its fiscal first quarter ending in April of 39-41 cents before items, compared with the analysts’ average estimate of 42 cents.

The company sees revenue at $14.2-14.6bn (€11.9-12.24bn), or year-over-year growth of about 6%-9%, while analysts were forecasting $14.7bn (€12.32bn).

Dell remained the world’s top seller of PCs in the fourth quarter, with 17.2% of the market.