Wednesday, May 19, 1999

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Latest Market Numbers

Dell Posts 42% Profit Gain

PC direct seller Dell Computer (Nasdaq: DELL) posted a 45% increase in its fiscal first-quarter earnings per share to $0.16 (42% gain in total profit), and a 41% rise in revenues to $5.5 billion on strong sales of servers and computers to consumers. Revenues from network servers, workstations, and storage products jumped 97% from a year ago.

Dell moved lower in after-hours trading, as earnings came in right in line with analysts' mean estimate, though according to IBES, the estimates of 33 analysts ranged from $0.15 to $0.17 a share. Plus, earnings per share results were helped somewhat by Dell's repurchase of 18 million shares of its stock. Analysts were also concerned that gross margins dropped more than expected, to 21.5% of sales from 22.3% in the same year-earlier quarter and 22.4% in the preceding fourth quarter.

Still, concerns about Dell's performance might be overblown. Yes, margins declined, but lower prices also helped to accelerate sales. The company's online sales through dell.com exceeded $18 million per day during the quarter, accounting for 30% of total revenues. Dell grew at about 2 1/2 times the estimated industry rate and surpassed IBM (NYSE: IBM) to become the second-largest PC maker in the U.S.

Looking ahead, CEO Michael Dell said the PC industry remains healthy for companies with "effective, efficient business models." He added that the company expects to continue to grow much faster than the rest of the industry and sees "significant opportunity for expanding our business profitably." In a conference call with analysts, CFO Tom Meredith said the company sees sequential revenue growth in the "mid-single digits" compared with a slowdown predicted by many of Dell's competitors.

News to Go

Healtheon Corp. (Nasdaq: HLTH) and WebMD Inc. are expected to announce an all-stock merger valued at around $5.5 billion that will create a website linking doctors and patients and promoting health-related e-commerce, The Wall Street Journal reported. The deal will also include major investments totaling some $500 million from such partners as Microsoft (Nasdaq: MSFT), Excite (Nasdaq: XCIT) and Intel (Nasdaq: INTC), people familiar with the matter said. WebMD is expected to be the exclusive health-care content provider to Excite, Microsoft's MSN.com, and Lycos (Nasdaq: LCOS).

Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) has bought a 2.2% stake in British drinks and food group Allied Domecq PLC, whose brands include Ballantine's scotch whisky, Beefeater gin and Kahlua liqueur, as well as Dunkin' Donuts and Baskin-Robbins. The 22.8 million share stake is worth around �125 million, or $202 million. Check out our recent reports on Buffett and Berkshire Hathaway and the company's annual meeting.

Online auctioneer eBay Inc. (Nasdaq: EBAY) announced it has acquired two privately held companies for about $275 million in stock: collectible-car auctioneer Kruse International and credit-card payment services firm Billpoint Inc.

Diversified manufacturing and services company Tyco International (NYSE: TYC) announced it will acquire electronic components maker Raychem Corp. (NYSE: RYC) for $37 a share, or $2.87 billion, in cash and stock.

Semiconductor equipment maker Applied Materials (Nasdaq: AMAT) reported fiscal second-quarter earnings of $0.36 a share, compared with $0.37 last year and ahead of analysts' mean estimate of $0.27, though forecasts had ranged as high as $0.35. Revenues totaled $1.12 billion, down 5% from $1.18 billion a year ago.

PC direct seller Creative Computers (Nasdaq: MALL) said it will distribute its remaining holdings in uBid Inc. (Nasdaq: UBID) to shareholders on June 7. Shareholders will receive 0.7 of a uBid share for every Creative Computers share.

Telecom-equipment maker PairGain Technologies (Nasdaq: PAIR) disclosed in an SEC filing that the company and two top officers, including Chairman Charles Strauch, have been identified as targets of a federal criminal investigation into losses by a Beverly Hills money-management firm.

More Foolishness

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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor