Surge in sales plunges Dell into dollars 36m loss: US mail-order computer supplier unable to match demand

DELL, the US personal computer company, was dollars 36m ( pounds 24m) in the red in 1993, its first annual loss, after profits of dollars 101.6m the previous year.

The company, set up in the Eighties as the first mail-order computer supplier, blamed the collapse on its inability to keep up with soaring sales.

Sales in the year to January 1994 rose 43 per cent to dollars 2.87bn from dollars 2.01bn in fiscal 1993 in spite of delays with new products.

Michael Dell, chairman and founder, said: 'Our growth has brought with it some serious issues in our systems and processes that made fiscal 1994 a very disappointing year for us and for our shareholders. We have made substantial progress in addressing these issues and will continue to focus on them in the current year.'

The company said the loss for the year was due to provisions taken in the first six months. Performance in the latter half of the year had been relatively strong, particularly in sales to large companies and in the European market.

Earnings in the fourth quarter fell to dollars 17.7m from dollars 31.3m a year earlier. Dell said it had experienced a seasonal drop in sales to the US government but that sales to large corporations increased 33 per cent over the same period in 1993.

Last year, Dell's reputation as a quality supplier suffered when it was forced to recall thousands of notebook computers because of a design fault. The setback also meant that Dell lacked a notebook product; these account for an estimated one in six personal computers sold today.

Mr Dell said the company would build on its reputation for desktop computers, but would also move forcibly into the market for more sophisticated computers and portable machines. The company recently reached agreement with another US company, AST Research, for the supply of notebook computers and is also working on future generations of portables.

Mr Dell said that there was still much to do in establishing systems to help to manage growth and to cut operating costs. He also said Dell would work this year to achieve a stronger position in the North American market.

Dell's internal reorganisation has involved dividing the company into groups based along profit lines. The company has also streamlined its support for European customers by centralising operations at Bray in Ireland.

According to Dataquest, the analyst firm, Dell was the number five personal computer supplier last year, with a market share of 3.8 per cent. The league is dominated by IBM, with 13.6 per cent of the market, followed by Apple and Compaq of the US and NEC of Japan.