(Adds comments from analyst Bill Krener in sixth paragraph, and more Gladden comments in seventh and eighth paragraphs.)
DOW JONES NEWSWIRES
Dell Inc.'s (DELL) fiscal third-quarter net income dropped 5.1% on lower demand, a trend that giant personal-computer maker expects to continue, but the company benefited from cost-cutting and increased sales of higher-margin products.
Shares rose 3.8% to $10.18 in after-hours trading as profits handily topped expectations.
For the quarter ended Oct. 31, the world's second-largest PC maker after Hewlett-Packard Co. (HPQ) reported net income of $727 million, down from $766 million a year earlier. But per-share figures rose to 37 cents from 34 cents and shares outstanding fell 14% after buybacks.
Revenue slid 3.1% to $15.16 billion as shipments rose.
Analysts' estimates were for per-share earnings of 31 cents on revenue of $16.22 billion, according to a poll by Thomson Reuters.
Bill Kreher, analyst at Edward Jones, was impressed with Dell's cost-cutting moves during the quarter, which included a dramatic reduction in headcount. "In the face of slowing revenue, Dell's still able to grow earnings," he said. "What Dell is showing is they are in the beginning stages of strategic plan, and it gives me more confidence in the longer term."
Dell Chief Financial Officer Brian Gladden said during a conference call that the results were tempered by souring economic conditions. The global environment remained "challenging," he said. "We still have work to do. We will continue to plan and execute for a challenging environment and slower IT spending. We expect the challenging environment to continue. We're seeing global implications, and slowing in almost all of the businesses we are in."
Sales in Western Europe and the Americas were "especially" slow during the last quarter, he said. Meanwhile, growth in Brazil, Russia, India, China and other emerging markets remains on track.
Gladden added the company still expects to meet its goal of reducing operating expenses by $3 billion by 2011 with aggressive moves like headcount reductions. During Dell's just reported third-quarter, the company eliminated 2,000 jobs, which Gladden points out means Dell has now met its goal of reducing headcount by 8,900 this year.
He also said the company continues to consider the sale of its manufacturing facilities, and the company could use some of its $8.9 billion in cash on hand to make strategic acquisitions.
For the quarter, Dell's gross margin rose to 18.8% from 18.5% on more sales of higher-margin products and services, lower component costs and continued cost-cutting efforts.
Chief Executive Michael S. Dell noted more than a one-third of the company's revenue and profit now comes from areas outside of PCs and laptops. Notebook sales rose 3% while desktops fell 14%. Sales of servers, the powerful machines businesses rely on as part of their computer networks, declined 5%.
Operating expenses declined 11%, and the company ended the quarter with 2,200 fewer jobs than in the second quarter, a 9% decline from a year earlier. Dell about a year ago outlined a plan to reduce its head count by nearly 10%, or 8,900 workers.
International activity continued to increase, making up 48% of Dell's revenue. Revenue from Dell's core business customers in the Americas fell 8% and shipments dropped 14%. By comparison, revenue from Brazil, Russia, India and China climbed 20% during a 43% surge in shipments. Those countries made up 9% of Dell's total revenue.
The company said global demand slowed in October, resulting in negative cash flow from operations of $86 million. "As company growth stabilizes, more typical cash generation is expected to resume," Dell said. The company ended the quarter with $7.9 billion in cash, down from $8.6 billion on Aug. 1.
Several analysts recently said Dell is likely to suffer declines in earnings and sales well into 2009 because of the broad global slowdown. Gartner Inc., an information-technology research firm, said Dell's market share fell to 13.6% globally in the third quarter compared with H-P's 18.4%.
On Tuesday, H-P announced better-than-expected fourth-quarter earnings, the first good news for the tech industry in weeks. Chip giant Intel Corp. (INTC) last week warned that revenue for the current quarter would be disappointing.
(Ben Charny contributed to this report.)
-By Kathy Shwiff, Dow Jones Newswires; 201-938-5975; Kathy.Shwiff@dowjones.com
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(END) Dow Jones Newswires
November 20, 2008 17:17 ET (22:17 GMT)

Publié le 20 novembre 2008 Copyright © 2008 Dowjones