Notebook Sales Help Dell to Surpass Forecasts NYTimes.com

Dell delivered the goods on Thursday.

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Dell, the second-largest computer maker, beat analysts’ forecast for its first quarter on strong notebook sales and lower costs, sending a strong signal that the company’s year-old turnaround plan is working.

The company’s first-quarter revenue was .08 billion, up 9 percent from .72 billion in the year-earlier quarter. Net income was 4 million, or 38 cents a share, up from 6 million, or 34 cents, in the period a year ago.

Analysts forecast an average profit of 34 cents a share on sales of .68 billion, according to Thomson Financial.

“We are executing on all points of our strategy to drive growth in every product category and in every part of the world,” said Michael S. Dell, the company’s founder, who returned as chief executive to lead its turnaround effort in January 2007. Since his return, Mr. Dell has instituted a broad plan aimed at cutting costs, improving customer relations and revamping the product line.

At the same time, the company also warned that businesses appear cautious about technology spending, and that the caution is spreading to smaller companies from large ones.

“We are seeing conservatism in I.T. spending in the U.S.,” said Donald J. Carty Jr., Dell’s chief financial officer. “We expect that to continue in the summer.”

Mr. Carty, who will be succeeded this quarter by Brian Gladden, said the company was seeing the caution mostly in the desktop market, while servers and storage products were strong. Sales in the United States commercial division, which accounts for 45 percent of Dell’s business, remained roughly flat.

Wall Street analysts have been concerned that an economic slowdown in the United States, along with lower average selling prices that have resulted from a price war with competitors, could further hurt the company. But Mr. Dell said companies appeared to see the value in updating their computer systems even in difficult times.

“Even companies in the most dire situations have to upgrade their productivity tools,” Mr. Dell said.

Dell shares rose 12 cents to close at .81 before the report, which was released after the end of regular trading. Shares rose as high as .97 in after-hours trading, or nearly 10 percent.

Dell’s unit sales were up sharply during the quarter, with most categories growing faster than the industry. Overall product shipments increased 22 percent during the quarter, the biggest increase in two years, with servers growing 21 percent. Notebook unit growth, a priority for the company, was 43 percent.

“It was pretty impressive. They were able to do better than expected,” said Shaw Wu, an industry analyst at American Technology Research. “They did a better job of translating strong unit growth into actual results.” He noted, however, that Wall Street’s expectations for the quarter were low. The company did not provide specific guidance for the second quarter.

Dell, of Round Rock, Tex., has been struggling to stage a comeback after losing its lead in the personal computer market last year and has spent more than a year making fundamental changes to try to return to consistent profitability and profit margins. The company has been focusing on its notebook computer line, with its higher margins, and on increasing sales to emerging markets.

Dell’s revenue from international sales grew more than revenue from United States sales for the first time. Brazil, Russia, India and China led the growth with a 58 percent revenue increase, accounting for 9 percent of Dell’s sales during the quarter.

Mr. Carty said the company had cut 7,000 jobs during the last 12 months, while adding about 2,700 employees through acquisitions. Dell executives said they saw opportunities for further job reduction but did not elaborate.

“We are cutting costs every day for the life of this company,” Mr. Carty said.

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