Although Dell Computer Corp. missed its year-over-year revenue target by 5 percent as reflected in its most recent earnings report, analysts expect the computer hardware direct marketing giant's revenues to increase later in the year due to a new focus on Web development and an increase in European sales.
Dell, Round Rock, TX, posted earnings of $0.22 per share during the quarter that ended July 28, a penny higher than analysts' estimates and higher than the $0.19 cents it earned during the same quarter last year. However, analysts and investors were more concerned about the company's missed revenue target. Year-over-year revenue increased 25 percent to $7.7 billion, below Dell's goal of 30 percent.
“European sales and U.S. government sales were not as strong as anticipated, but we are increasing European efforts and there will be a stronger demand from the U.S. government in the second half,” said Dell spokesman Venancio Figueroa.
He added that the government sector tends to spike during August and September. As part of an initiative to boost European sales, Dell Germany announced last week that it plans to boost online sales from 45 percent to 75 percent of its total sales in three years.
On Aug. 29, Dell closed at 40 9/16, considerably lower than its 52-week high of 59 7/10 recorded on March 22 and close to the 52-week low of 35 recorded on Feb. 8.
“Investors are concerned that Dell is not growing as fast anymore,” said Jimmy Johnson, technology analyst at A.G. Edwards, St. Louis. “A company of this size cannot achieve the 50 percent revenue growth it once did, but it still continues to grow in multiples [compared] to its industry peers.”
In the long term, Dell expects to realize its anticipated growth through the focus on its new VC Direct initiative, which was announced last week, Johnson said. This program teams Dell with U.S. venture capital firms to provide their portfolio companies with access to Dell's technology. This program will allow for further internal company growth and will provide Dell with investment opportunities, he added.
In April Dell announced Expert Services, a program in which the firm assists budding e-commerce companies with Web site development, e-business maintenance and assistance in creating online transactional systems.
“We are leveraging our corporate direct marketing clients for this new program,” Figueroa said.
While the firm continues to concentrate on computer hardware direct sales to corporate clients, small businesses and homes, this new service would supplement the company's profits and would help it reach its goal of a 30 percent revenue increase.
In an attempt to go beyond PC sales, Dell is focusing on mobile device sales, such as notebook computers, workstations, servers and storage products. Sales of these products accounted for 49 percent of total hardware sales during the quarter that ended July 28, resulting in a 9 percent increase over the same quarter last year.
“A lot of companies aren't making money anymore in PC sales,” Figueroa said. “We are also focusing on mobile sales so we can grow across the board.”
In other news, Trend-Lines Inc. and its wholly-owned subsidiary Post Tool filed for Chapter 11 bankruptcy protection. The company's stock symbol was changed from TRND to TRNDQ and the stock price posted in the DM News Portfolio is as of Aug. 11, the day on which trading was halted in Trend-Lines by Nasdaq.
Also, Catalina Marketing was adjusted for a three-for-one split.
Portfolio value: If $1,000 had been invested in each of the 100 companies in the DM News Portfolio at the beginning of the year — for newly public companies, when the stock first closed — the value would be $87,795, a year-to-date decline of about 12.21 percent.