ENGINEERING

AUSTIN, TX -- Dell (Nasdaq:DELL) further increased its appeal to enterprise computing customers and again demonstrated a unique ability to manage costs, en route to better-than-expected revenue and earnings per share for the fiscal first quarter, which ended May 3. The company has met or exceeded its guidance to investors for five consecutive quarters, and expects to achieve year-over-year growth in both revenue and EPS in Q2. Total first-quarter shipments of Dell standards-based servers, storage products and workstations jumped 16 percent. The company gained more than two points of server market share worldwide and three in the United States. Dell's U.S. server share reached 30 percent for the first time, as the company continued to lead that strategically important market category even after recent industry consolidation. At the same time, Dell further enhanced the efficiency of its customer-focused direct business model, driving operating expenses as a percent of revenue below 10 percent for the first time in company history. Dell reported first-quarter net earnings of $457 million, or 17 cents per share, on revenue of $8.1 billion. Those numbers were higher than guidance provided on April 3, when Dell said revenue could reach $7.9 billion and per-share earnings 16 cents. Results for the period were essentially identical to those for the first quarter one year ago. "Our objectives are simple and unchanged: to further reduce costs; to deliver great value to customers, particularly enterprise customers; and to profitably gain market share," said Kevin B. Rollins, Dell's president and chief operating officer. "We're continuing to make good on all three commitments." Mr. Rollins said Dell currently anticipates second-quarter industry unit shipments will be off about 5 percent from the first quarter, consistent with historical seasonal patterns, and that revenue will drop at a larger rate. However, he said Dell's Q2 revenue could be up 8 percent year-over-year to $8.2 billion, with higher operating margin producing per-share earnings of about 18 cents. Operating profit as a percent of revenue in the most recent quarter was relatively stable sequentially, despite moderation in the rate of component-cost declines. Dell's operating margin of 7.3 percent was equal to the year-ago level. Operating expenses fell to 9.9 percent of revenue, a record low for the company and down from 10.7 percent in last year's first quarter. Mr. Rollins said Dell is on track or ahead of plans for further cost reductions in four critical areas: product design, manufacturing/distribution, operating expenses and warranty costs. In total, the company believes it can reduce costs by more than $1 billion in fiscal 2003, with larger portions of that improvement occurring during subsequent quarters. Cash and investments at the end of the quarter totaled $8.2 billion, as Dell generated nearly $600 million in cash from operations. Inventory was nearly 20 percent lower than a year ago period, when revenue was virtually the same.