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Dell affirms 2Q forecasts
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July 19, 2001: 11:59 a.m. ET
Sets higher-than-expected charge of $700 million; affirms prior forecasts
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NEW YORK (CNNfn) - Shares of Dell Computer Corp. jumped Thursday after the biggest U.S. personal computer maker said it expects second-quarter sales and profit to meet its earlier forecasts. But Dell warned it would take a higher-than-expected charge for job cuts and other items.
Austin, Tex.-based Dell said it expects to report sales of $7.6 billion and earnings of 16 cents a share for its second fiscal quarter ending in August, excluding a $700 million charge for previously announced job cuts and restructuring.
Wall Street has been expecting a profit of 16 cents a share for the quarter, down from 22 cents a share a year earlier, according to First Call, which tracks analysts' estimates.
Relieved investors lifted shares of Dell (DELL: up $1.04 to $28.24, Research, Estimates) in midday trade on the Nasdaq.
"You don't have a lot of hardware companies making their numbers right now," said Goldman Sachs computer hardware analyst Joe Moore. "The fact that they were able to be precise about a quarter that has still got two weeks to go has got to make people comfortable."
Dell also said it expected to post revenue of $7.6 billion, at the low end of a range of $7.6 billion-to-$7.76 billion the company gave in May.
Charge larger than expected
The $700 million charge roughly doubles the hit Dell said it expected in May, when it announced it would take a one-time pretax charge of $250 million-to-$350 million against its second-quarter earnings, primarily for cuts of between 3,000 and 4,000 jobs and facilities consolidation.
Dell said the larger charge was due to the writing down of some assets, including investments by its venture capital arm, Dell Ventures.
Dell said in a statement that Chairman Michael Dell will tell stockholders at the company's annual meeting later Thursday that Dell is growing faster than the rest of the PC industry and is offsetting sluggish demand and low prices by cutting expenses.
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Worldwide sales of PCs are expected to be either flat or as much as 3 percent-to-5 percent down from the first quarter.
Dell's direct sales model, which allows it to pass on falling component prices to its customers, is widely seen as giving the company the upper hand against its rivals even as overall PC demand weakens.
Dell, which took the top PC-maker spot from Compaq Computer Corp. (CPQ: up $0.50 to $16.16, Research, Estimates) this year, plans to release full second-quarter results and provide third-quarter guidance on August 16. 
-- from staff and wire reports
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