Direct sales PC maker Dell Computer said it would meet first quarter EPS projections of 16 cents per share despite "industry softness and change" that has hurt its competitors.

With increased competition expected from the pending Hewlett Packard/Compaq merger, the Texas-based Dell said lowered operating costs in areas of product design, warranty expenses and call center management helped improve its financial performance this quarter.

"We've stepped up our pursuit of internal cost reductions through still-higher levels of quality and efficiency," chief operating officer Kevin Rollins said on the eve of an analysts conference to discuss the company's business.

The company, which generates about three-quarters of its sales from desktop and notebook PCs, echoed earlier projections that it would earn 16 cents per share despite projections of a slight decline in revenues. Dell said sales would reach $8 billion, a 2 percent decline over the same year-ago period. Dell said the 2 percent revenue drop was lower than previous targets of between 3 percent and 5 percent.

The news came on the heels on Wednesday's announcement that Dell plans to get into the server blade business, a niche that is all the rage in the hardware server sector these days. The company also sells enterprise products that include network servers, workstations, and storage systems.

Last February, the company cut about 1,700 jobs to ride out the storm in the PC sales sector and, in a statement Thursday, Dell said those cutbacks and other operating advantages helped score major customer wins.

Rollins, who led Thursday's conference call along with CEO Michael Dell and CFO James Schneider, said the company has used broad, fundamental operating advantages to "profitably win and deliver value to customers in the midst of industry softness and change."

"Component costs fell at an unprecedented rate last year, and we gained significant new business from passing those declines to customers more rapidly than anyone. Supply costs have flattened somewhat, but our competitive advantage has not," Rollins added.