MICHELLE HAN, CNN ANCHOR: Dell Computer dropped a bombshell on Wall Street overnight. After the close, Dell said it hit first quarter earnings targets, but that second quarter sales would decline. CNN's Bruce Francis has the story.</s>BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): Michael Dell cheered results that would have been disastrous for his company just a year ago.</s>MICHAEL DELL, CHAIRMAN & CEO, DELL COMPUTER: We essentially captured over 100 percent of the industry's profits. As you know, most of our competitors lost pretty considerable sums of money, and there is a big difference in the cost structures here.</s>FRANCIS: Despite a corporate tech spending slowdown, Dell racked up a 50 percent increase in high-end servers. That helped Dell meet targets that the company confirmed earlier this month, earnings of 17 cents a share in line with estimates; net income flat with last year, revenues increased 10 percent. Dell has been aggressively cutting prices, even offering customers a buy three, get one free promotion on certain computers. Some on Wall Street are concerned that Dell is sacrificing too much.</s>ROBERT CIHRA, ABM AMRO: For every point of share they are gaining, they are really getting it back in margins, and ultimately, at the end of the day, Dell's ending up with more marketshare, but no more profits.</s>FRANCIS: And Dell says the pressure continues. Dell predicts second- quarter earnings will be 15 to 17 cents a share, as much as 3 cents lower than first call's current average. Revenues will fall 3 to 5 percent, and operating margins will be flat to down slightly. That operating margin decrease will come despite layoffs of up to 5700, or about 13 percent of it's employees. Bruce Francis, CNN Financial News, New York.
Dell Computer Drops Bombshell on Wall Street Overnight