Updated from 5:03 p.m. EDT

Dell Computer

(DELL) - Get Report

, the largest direct vendor of computers in the world, reported a 21% increase in its first-quarter earnings Thursday that beat Wall Street's expectations.

The company also overcame its previous warnings of flat sales for the quarter.

For the quarter ended April 28, net income rose to $525 million, or 19 cents a diluted share, from $434 million, or 16 cents a share a year earlier, beating by 3 cents the consensus estimate of analysts polled by

First Call/Thomson Financial

.

Revenue for the Round Rock, Texas-based company rose 31%, to $7.3 billion, from $5.5 billion in the 1999 first quarter.

Dell, the second-largest maker of personal computers, had warned back in February that sales in the first quarter would not be significantly higher than fourth-quarter sales because many businesses decided to refrain from buying computers for fear of problems related to the Year 2000 transition. In addition, there were worries about component shortages. But in fact, Dell posted sales in the first quarter that were 7% higher than sales in the fourth quarter.

The company did not disclose any clues regarding two issues which have been of great concern to investors: the outlook for component shortages and component demand.

But overall sales of enterprise-class computer systems increased 52% and comprised 18% of system net revenues, up from 16% a year ago. "They did very well in their enterprise segment, so it appears that corporate demand is picking up," said Art Russell, senior technology analyst at

Edward Jones

. "We knew March would be strong, but would it continue into April? From looking at these numbers, I would say yes, they did continue." He rates Dell a strong buy and his firm has done no underwriting for the company.

Dell also said that an improved product mix together with lower-than-expected costs for key components helped the company make investments in its Internet strategy and lift net margins from fourth-quarter levels. "That tells me that the component cost environment moderated," Russell added.

Shares of Dell closed Thursday regular trading down 3/16, or 0.42%, at 44 11/16. In post-market activity, the shares were up 3 1/16, or 7%, to 47 3/4, according to

Island ECN

.