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Stock Analyst Update

Dell's Quarter Is Just What the Nasdaq Needed

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Dell Computer (DELL) is back in the saddle again after reporting disappointing fiscal-year-end results in February. Both growth and margins returned to their old forms in the company's fiscal first quarter, which ended in April. Dell's earnings were $0.19 per share--almost 20% better than expectations, though a penny of its earnings came from higher-than-expected investment gains.

One key reason for the better-than-expected results was a strong recovery in corporate-technology spending after Y2K fears abated. In the quarter ended in January, Dell's earnings were disappointing largely because companies were slow to resume spending soon after the millennium. But sales were favorable in March and April in the PC industry. Dell grew its sales by more than 30% last quarter over the year-prior quarter. Another problem last quarter was higher-than-expected component and shipping costs, which caused margins to slip. Component costs have since come down, however, boosting Dell's operating margins a full percentage point over those from the January quarter.

Jeremy Lopez does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.