ROUND ROCK, Texas (Reuters) - Dell Computer Corp. DELL.O ,the No. 2 personal computer maker, said on Thursday first-quarter earnings fell on low personal computer prices, even as the company increased revenues and topped Wall Street expectations.

Dell, which has used its direct business model to keep PC prices low, guided earnings and revenue forecasts higher for the second quarter and said it expects to continue to gain market share, although it expects industry shipments to decline by about 5 percent.

Round Rock, Texas-based Dell, which lost its spot as the No. 1 personal computer maker after Hewlett-Packard Co. HPQ.N bought Compaq Computer Corp. earlier this month, said net income fell to $457 million, or 17 cents per share, compared with $462 million, or 17 cents per share in the year-earlier quarter.

Revenues rose slightly to $8.07 billion from $8.03 billion.

Analysts' average estimate for earnings was 16 cents a share and revenue of $7.8 billion, according to Thomson Financial/First

Dell also committed to keeping costs low, saying it will reduce costs by more than $1 billion in fiscal 2003. It will cut costs in product design, manufacturing and distribution, operating expenses and warranty costs, the company said.

It said it expects second-quarter earnings of 18 cents per share and that revenues will increase 8 percent from the year-earlier quarter to $8.2 billion.

Analyst estimates are for second-quarter earnings of 17 cents per share on revenue of $8.02 billion.

Dell is known for its direct business model, which last year enabled it to cut prices sharply and gain market share. In addition to PCs, Dell sells computer servers, networking switches and as of this week, digital projectors.

At the beginning of 2002, the company began reselling data storage machines made by EMC Corp. EMC.N and is considering taking on production of some less pricey storage systems.

Michael Dell, the company's founder and chief executive officer, has said that Dell benefited during the quarter from the confusion surrounding the merger of HP and Compaq, as some customers uncertain about which products would be around after the merger switched to Dell.

Dell shares rose slightly on Thursday to $27.15, up 15 cents, ahead of the results. The shares have gained 3 percent so far this year while the American Stock Exchange Computer Hardware Index .HWI has lost 7 percent.