Dell (DELL) doesn't want the market to forget it's the king of the heap.Even though the computer maker is in the middle of its fourth quarter of fiscal 2002, it couldn't let the PC party pass it by. On Friday morning, Dell boosted its revenue and earnings expectations for the quarter that ends Feb. 1, raising its revenue projections 5%, from $7.6 billion to $8 billion. Dell also raised its profit estimates by a penny, to 17 cents a share. The company feels good enough about its PC sales to announce that computer shipments will be up 50% sequentially and revenue will climb 40% in its consumer segment. For comparison, revenue for Compaq's computer business grew 16% sequentially in its fourth quarter ended Dec. 31, 2001, and last night IBM's ( IBM - Get Report) CEO blamed the company's PC unit for sluggish company revenue. IBM's PC and printing group revenue rebounded only 3% from a tough third quarter to the fourth quarter, while falling a steep 31% from the fourth quarter of 2000. In a devastating year for most PC players, Dell expects the actual number of computers sold to increase year over year from fiscal 2001 to fiscal 2002 (though revenue will still fall 8% year over year if Dell hits its new quarterly forecast). Analyst estimates were in line with Dell's previous guidance, not yet reflecting indications that the holiday season was a good one for the PC industry. Wall Street was expecting $7.67 billion in revenue, good for 16 cents a share in profit, according to Multex.com. Dell's new $8 billion figure would represent 7% sequential revenue growth from the fall quarter. Morningstar's Joe Beaulieu was impressed by the idea that Dell could do so much better than its peers while holding margins steady. "Dell's PCs are already such a bargain, they don't need to put on any more pressure," he said. "But they will do that anyway to squeeze competitors even more." Dell's aggressive cost-cutting in 2001, based on its ability to pass along savings on component costs, has wreaked havoc on its competitors. IBM moved in early January to outsource the manufacturing for its NetVista desktop product line to Sanmina-SCI ( SANM - Get Report) in an attempt to get its costs more in line with Dell's. IBM retained the option to increase its outsourcing to the contract manufacturer, and handed over a facility in Research Triangle Park, N.C., as an admission that its own manufacturing skills weren't good enough. On Thursday, Hewlett-Packard made a similar move, announcing it was negotiating to transfer a French operation to Sanmina-SCI in an effort to reduce its PC unit's costs. "There's no question. You have to be as good as Dell, and Dell outsources a lot to other people who are very good," explains Alexander Blanton of Ingalls & Snyder, who specializes in electronics manufacturers. "If you're an IBM, you're saying, 'what are our chances of becoming an expert in managing our supply chain and inventory?' Not very likely." While its competitors play catch-up, Dell is scrambling to extend its lead. Given its Friday announcement, it's still making progress.
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