All's Not Well With Dell: Fool by Numbers

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:

• Foolish Forecast: Dell Tells All
• Another Path to Profit: Riding Dell's Coattails
• Invest Against the Headlines