Dell: Sales to Rise This Holiday Season

Michael Dell also expects the shakeout in the computer industry to continue as more companies merge or acquire other businesses to strengthen their market positions.

Despite signs the U.S. economy is weakening, the founder of Dell Computer Corp. predicts sales will rise this holiday season and continue to rebound in 2002.

But Michael Dell, in a speech at a Prudential Securities gathering in New York on Wednesday, said he expects the shakeout in the computer industry will continue as more companies merge or acquire other businesses to strengthen their market positions.

Dells optimistic outlook for the fourth quarter stands in contrast to what many market analysts expect to be a rather glum holiday season, with consumer demand being undermined by a slumping U.S. economy and concerns over global instability related to the U.S.-led war on terrorism.

Underscoring that point, the Commerce Department reported Wednesday that the U.S. economy shrank from July through September, marking the first such contraction since 1993.

"I believe the consumer selling season in the fourth quarter is going to be pretty good," Dell, the Round Rock, Texas, companys chairman and CEO, said Wednesday. "The fourth quarter is always a good quarter for consumers. I think it will be a good quarter this year, as well."

But others remain unconvinced. On Tuesday, Merrill Lynch market analyst Steve Fortuna lowered his fourth-quarter revenue forecasts for Dell from $7.8 billion to $7.5 billion.

While Dell and some industry observers are looking for the recent release of Microsoft Corp.s newest operating system, Windows XP, and the accompanying massive promotional campaign to boost PC sales, Fortuna remains skeptical.

"It is our belief that Windows XP will not do much to drive a significant up-tick in consumer PC sales in the fourth-quarter," he said in a note to investors.

Looking further ahead, Dell Wednesday also predicted the computer industrys yearlong slump will come to an end in 2002 with sales rising slightly.

However, Dell said, industry growth for the next several years will likely only be in the high single digits. Thats well below the boon years of the late 1990s and early 2000, when year-over-year sales at times grew more than 20 percent.

With the industry maturing and settling down to more modest growth, he said, computer makers will likely pursue mergers and acquisitions to solidify their positions.

"I think the likelihood of further industry consolidation is very high," Dell said.

Such a shakeout is already under way, with Hewlett-Packard Co. currently seeking government approval to acquire longtime rival and fellow industry leader Compaq Computer Corp. Based on the companies current sales, the deal would create the worlds largest PC vendor, surpassing Dell, which only secured the top sales position early this year.

But while some may view the HP-Compaq combination as a looming threat to Dells business, the company founder said he sees it as an "enormous opportunity over the next 18 months to capitalize on the confusion."