Dell Reports Better-Than-Expected Profit
Posted on: Friday, 21 November 2008, 07:20 CST
On Thursday, the world’s second largest personal computer maker, Dell Inc, posted better-than-expected quarterly profit. Dell shares rose 6 percent with the announcement.
The company had been facing low expectations for its October quarter, and warned in September that it was seeing a “softening” of its global demand.
On Thursday, the company said it expected global demand to continue to be challenging, and reported that global shipments had dipped below 14 percent during the third quarter.
The unexpected announcement rallied Wall Street, but the after-hours share rise only made up for the drop during regular trading.
"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, analyst for Edward Jones.
Net profit during the fiscal third quarter fell 5 percent to $727 million from $766 million in the previous year, but per share earnings rose as Dell bought back shares.
Third quarter revenue was $15.16 billion, coming in below analyst’s estimate of $16.3 billion.
The company is expected to incur costs as it looks to improve competitiveness by reducing headcount, and investing in infrastructure and growth opportunities.
Analysts still believe Dell is vulnerable because of the global economic crisis, and the weakening PC market.
The company has been cutting jobs to adjust for slower demand and has nearly reached its goal of cutting 8,900 jobs.
Dell shares are now at levels that have not been seen in 10 years, down 60 percent this year. Shares ended at $9.81 on Thursday.
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Source: redOrbit Staff & Wire Reports
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