Dell Profit Rises, but Sales Growth Slows --- Revenue Target Is Missed; Shift to Server Market Means Bigger Challenge
Dell Computer Corp. said fiscal second-quarter earnings rose 19%, but revenue increased at the slowest rate in nearly six years.</br></br>The biggest U.S. personal-computer maker reported net income for the quarter ended July 28 of $603 million, or 22 cents a diluted share, compared with $507 million, or 19 cents a share, a year earlier. The results exceeded analysts' expectations of a 21-cent-a-share profit by a penny, according to First Call/Thomson Financial.</br></br>The mixed results reflect slower growth in its desktop PC sales and Dell's growing reliance on sales of server computers for its revenue and profit. Server computers, which power Internet Web-sites, are growing faster and deliver higher margins than PCs due to their greater utility.</br></br>Server computers are a relatively new business for Dell, but one growing faster than its traditional desktop PC business. It said unit sales rose just 22%, compared with a 55% increase a year earlier.</br></br>Higher server sales helped boost gross profit margins to 21.3% of revenue, from 20% in the year-earlier period. The margin improvement also reflected lower-than-expected component prices and burgeoning laptop PC sales, according to Dell Vice Chairman Kevin B. Rollins.