Direct PC seller Dell announced third-quarter results after the market's close today, in line with the consensus Street expectation. With speculation throughout the day looming that Dell had "juiced" revenue numbers at quarter's end, shares traded down roughly 6% to close at $28.38. The company also reconfirmed earlier guidance that called for sales to rise 27% year-over-year, slightly below the 30% growth the company was expecting earlier in the year.
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Direct PC marketer Dell (Nasdaq: DELL) announced third-quarter results after the market's close today, with earnings of $0.25 per share, compared to $0.18 per share in the year-over-year period. The results were in line with the consensus Street expectation. Revenues raised a mere 22% from the year-ago period to $8.3 billion, and on a sequential basis grew 7.7%. With speculation throughout the day looming that Dell had "juiced" revenue numbers at quarter's end, shares traded down roughly 6% to close at $28.38. Tonight's results were no surprise after the company issued a revenue warning, expecting growth of 7%, contrary to earlier guidance calling for 10%. The company cited soft European demand and slower-than-expected sales to small business customers as causes for the revision. However, Dell was quick to note profit margins would not be adversely affected and the company was still in line to meet profit estimates. Likewise, gross margins matched the previous quarter figure of 21.3%, and inched up year-over-year from 20.2%. While it's a certainty the days of 40% and 50% revenue growth are over, the key to this box maker's success is to grow operating earnings and operating cash flow at rates greater than sales growth. With help from favorable component pricing, operating margins expanded to 9.9%, slightly increasing from 9.6% in the previous quarter. Operating income came in at $818 million, up from $456 million in the year earlier period. As in previous periods, Dell's bottom line was bolstered with $145 million in investment income (versus $125 million in the previous period), providing the company with net income of $674 million, up 40% from last year. Net income was 8.2% of sales, slightly increasing from the previous period of 7.9% figure and nearly meeting the 8.3% number last year. Moreover, the company generated cash from operations in excess of $1 billion, a slight decrease from the previous period of $1.2 billion. The company also reconfirmed earlier guidance that called for sales to rise 27% year-over-year, and slightly below the 30% growth the company was expecting earlier in the year. Growth outside of the desktop remains high. "More than 50% of revenue, roughly two-thirds of operating profit, came from sales of enterprise products, notebooks, and services. We're seeing history repeat itself: as they did with desktop PCs, customers of high-end computing products and services are increasingly choosing to purchase them directly, from Dell," said Chairman and CEO Michael Dell in a press release.
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