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Dell PC Sales Off 2%; Notebook Segment Rises 14%

Round Rock, Texas — In a continued shift from sales of desktop PCs to notebook computers, Dell recorded a fiscal third-quarter decrease of 2 percent year-on-year in its desktop business, down to $5.1 billion, from $5.2 billion in the same quarter the prior year.

However, the desktop segment, by far Dell’s largest business, recorded year-over-year unit growth of 6 percent in the three months. Desktop PCs accounted for 37 percent of total net revenue in the third quarter, down from 42 percent in the same three months a year ago.

Dell’s mobility business, which includes notebooks, enjoyed a 14 percent rise in revenue during the third quarter, ended Oct. 28, climbing to $3.6 billion, from $3.1 billion a year earlier, while unit growth for the period jumped 38 percent. The mobility category accounted for 26 percent of total net revenue in the three months, up from 25 percent in 2004.

Dell cited healthy sales among high-end PCs and notebooks introduced in the third quarter. These units are of particular interest to more technical users as well as gamers.

The company’s software and peripherals segment, which includes plasma and LCD television sets, registered a 25 percent increase in revenue during the third quarter, to $2.1 billion, from $1.7 billion year-on-year, driven mainly by higher sales of imaging and displays. Software and peripherals accounted for 15 percent of total net revenue in the third quarter, compared with 14 percent in the same period last year.

Growth of U.S. consumer products in the third quarter turned down 2 percent to $1.9 billion, while total sales in the Americas, boosted by 10 percent revenue growth for business products increased 8 percent to $9.2 billion, compared with $8.6 billion in the same period in 2004. The Americas accounted for 66 percent of total net revenue in the third quarter, down from 68 percent in the year-ago quarter.

Dell reported revenue growth of 20 percent outside the United States, an area which contributed 40 percent of total revenue during the three months. The company recorded record shipments of 9.2 million units worldwide in the quarter.

Dell continues to expect about a 10 percent fourth quarter increase in revenue year-on-year, driven by a seasonal increase in its consumer business, while margins should contract “modestly” from the third quarter.

In the nine months, desktop PC revenue rose 2 percent to $15.5 billion, from $15.2 billion last year. Mobility revenue jumped 18 percent to $10.3 billion from $8.7 billion, while software and peripherals revenue soared 29 percent to $6.1 billion, from $4.7 billion the prior year.

In the nine months, percentage of total net revenue for desktop PCs declined to 38 percent, from 43 percent year-on-year. Mobility enjoyed 25 percent of the total, up from a year-earlier 24 percent, and software and peripherals rose to 15 percent, from 13 percent.

For the nine months, consolidated revenue increased 14 percent, hitting $40.7 billion, compared with $35.7 billion in the same time frame last year.

Net income for the nine months rose 8 percent to $2.6 billion from a year-ago $2.4 billion, while operating income edged upward 1 percent to $3.10 billion from $3.07 billion.