Dell profit tops Street view, shares rise
SAN FRANCISCO (Reuters) - Dell Inc, the world's No. 2 PC maker, posted a better-than-expected quarterly profit on Thursday as cost cuts offset lower revenue, sending its shares up about 6 percent.
Dell had been facing subdued expectations for the October quarter. The company warned in September, just weeks after reporting second-quarter results, that it was seeing "further softening" in global demand.
Its share of global personal computer shipments slipped below 14 percent in the third quarter, according to IDC, and it said on Thursday that global technology demand would continue to be "challenging."
The unexpectedly strong results cheered Wall Street, although the after-hours share rise was close to the size of the drop during regular trade.
"It was certainly a surprise and what this shows is that cost-cutting initiatives are beginning to take effect. The slowdown in PC demand affected laptop sales and thus revenue," said Bill Kreher, a technology analyst at Edward Jones.
Net profit in the fiscal third quarter ended October 31 fell 5 percent to $727 million, or 37 cents a share, from $766 million, or 34 cents a share, in the year-ago period. Per share earnings rose as Dell bought back shares.
The average analyst estimate was 31 cents a share, according to Reuters Estimates.
Revenue in the period fell 3 percent to $15.16 billion, below the average analyst estimate of $16.3 billion, according to Reuters Estimates.
"The company will continue to incur costs as it realigns its business to improve competitiveness, reduce headcount in certain areas and invest in infrastructure, growth opportunities and acquisitions," it added.
Many analysts see Dell as vulnerable to the global economic slowdown due to the company's sizable exposure to a weakening PC market.
Dell has been shedding jobs, cutting costs and retooling its business to adjust for slower demand. It has nearly completed its plan to cut 8,900 jobs.
Dell shares are down around 60 percent this year, at levels not seen in a decade.
Dell shares rose to $10.40 in after-hours trade after closing Thursday's session down 5.2 percent at $9.81 on the Nasdaq.
(Reporting by Gabriel Madway, editing by Richard Chang)
