Dell Computer Corp.'s direct sales model, boosted by online sales, garnered it record revenue of $12.3 billion for fiscal 1998, a 59% increase over the previous fiscal year's $7.7 billion revenue figure, the computer company announced yesterday.
Earnings for fiscal 1998, which ended Feb. 1, were $944 million, up 82% from $518 million in fiscal 1997, or $2.56 per diluted share. This represents a 94% increase over the $1.32 per share figure for fiscal 1997.
For the fourth quarter of fiscal 1998, earnings were $285 million, up 52% from $188 million for the same quarter last year, or 81 cents per diluted share - a 62% earnings increase over the 50 cents per share figure a year ago. Revenue for fourth quarter fiscal 1998 grew 55% to $3.7 billion compared with $2.4 billion in revenue for the same quarter last year.
The figures, which today boosted Dell stock up 1 7/8 to 113 3/16, were higher than the 76 cents per share forecast by First Call Corp. based on a survey of analysts.
Dell's strong performance this year pushed it from being fifth in PC shipments worldwide in calendar 1996 to third in 1997.
The key to Dell's success is focusing on its direct model, which allows the company to closely control inventory, said Michael Dell, chairman and CEO, in a statement. Internet sales alone accounted for more than $4 million per day by the end of the fiscal year, the company said.
Dell pioneered the direct sales model, and its success has prompted other computer companies to reconsider the costs associated with conventional distribution methods that involve predicting customer demand. Companies risk losing money if they can't meet demand or if they wind up with surplus inventory. Their profit margins also are less than those of direct marketers because they have to share sales profits with resellers and distributors.
Among the companies that have expanded their distribution strategies in 1997 to include direct sales are: Compaq Computer Corp., Hewlett-Packard Co., IBM, Apple Computer, Inc., Packard Bell NEC, Inc. and Acer Group.
Going forward this year, Dell plans to expand its direct model in Asia-Pacific and Latin America, as well as further penetrate the European market, the company said.
Chairman and CEO Dell noted that the direct PC vendor's stock appreciated more than 200% for the second consecutive year and that the company led the computer industry in return on invested capital with a record 217% for the fourth quarter and 186% for fiscal 1998. The company ended the year with $1.8 billion in cash and marketable securities.
Dell also announced a 2-for-1 stock split today. A stock dividend for the split will be issued on March 6 to shareholders of record as of Feb. 27.
