On Nov. 29, Dell (NASDAQ:DELL) released third-quarter 2008 earnings for the period ended Nov. 2, 2007.

  • At first glance, it's hard to complain about 9% revenue growth and even better profit improvements in this hesitant economic environment -- but then you have to remember that HP is on an annual sales growth tear of about 14% now, and Apple (NASDAQ:AAPL) is strutting a 24% revenue boost.
  • The geographical revenue mix is shifting around just a bit -- sales in the Americas clocked in 5% above the year-ago result, while the rest of the world wanted 13% more Dell products this time.
  • The product mix isn't static, either. Servers and storage systems are in high demand, along with notebook computers. However, desktop sales are actually on the decline.
  • Dell used to buy back upward of $1 billion worth of its own stock frequently, but turned off that faucet entirely about a year ago. With SEC investigations and restatements in the rearview mirror, the company plans to start buying shares again this December.

(Figures in millions, except per-share data.)

Income Statement Highlights

Q3 2008

Q3 2007

Change

Sales

$15,646

$14,419

8.5%

Net Profit

$766

$601

27.5%

EPS

$0.34

$0.27

25.9%

Diluted Shares

2,266

2,238

1.3%

Get back to basics with the income statement.

Margin Checkup

Q3 2008

Q3 2007

Change*

Gross Margin

18.5%

16.6%

1.9

Operating Margin

5.3%

5.1%

0.2

Net Margin

4.9%

4.2%

0.7

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q3 2008

Q3 2007

Change

Cash + ST Invest.

$12,605

$9,318

35.3%

Accounts Rec.

$7,716

$6,333

21.8%

Inventory

$1,102

$680

62.1%

Liabilities

Q3 2008

Q3 2007

Change

Accounts Payable

$11,411

$10,335

10.4%

Long-Term Debt

$392

$579

(32.3%)

The balance sheet reflects the company's health.

Cash Flow Highlights

Q3 2008

Q3 2007

Change

Cash From Ops.

$998

$936

6.6%

Capital Expenditures

$172

$180

(4.4%)

Free Cash Flow

$826

$756

9.3%

Owner Earnings

$747

$538

38.8%

Free cash flow is a Fool's best friend.

Competitive Context

Market Cap

Trailing P/E Ratio

CAPS Rating

International Business Machines (NYSE:IBM)

$146,570

15.9

***

Hewlett-Packard (NYSE:HPQ)

$131,002

19.0

****

Dell

$54,490

19.4

**

EMC (NYSE:EMC)

$41,000

27.5

*****

Sun Microsystems (NASDAQ:JAVAD)

$17,110

30.2

***

Using the latest reported numbers from Capital IQ.

Keep your partners close and the competition in your vest pocket.

Related Foolishness: