Dell Shares Are Rewarded

Dell saw strong server growth, with shipments up 40%, while storage revenue grew 47%.

But the company didn't offer its usual boast about besting rivals on the PC front. For good reason: Gartner data showed that Dell lost some unit share to Hewlett-Packard(HPQ Quote) in the calendar fourth quarter. Management commentary suggested, though, that Dell had seen a much stronger performance in January and had passed up some sales at the low end rather than price more aggressively.

"Much of the industry's quarterly growth was at the low ends of the desktop and notebook categories, which offer little if any profitability. Dell met its operating targets by pursuing profitable growth," said Rollins in a statement.

For guidance, the company forecast April quarter sales of $11.2 billion and EPS of 28 cents, exactly on target with Thomson First Call estimates. Management said unit shipments and revenues will decline 3% on a quarterly basis, consistent with usual seasonal patterns.

Compared with last year's levels, product shipments in the first fiscal quarter should rise more than 20%.

On the call, Rollins noted that industry PC unit shipments have continued to accelerate since turning positive in the third quarter of 2002. "That said, there is still a ways to go as much of the growth has been at the low end of retail where margins are low," he said, adding that average selling prices for the industry fell 9% through the first three quarters of 2003, worse than the 4.5% drop for the same period in 2002.

Arch-rival H-P is one reason for the slide, Rollins suggested. H-P has complicated Dell's drive to gain share by periodically rolling out extra aggressive promotions -- to the point, at times, of pushing its own PC business into the red.