On Feb. 28, computing giant Dell (Nasdaq: DELL) released fourth-quarter 2008 earnings for the period ended Feb. 1. Let's see how the company measured up to our expectations.

  • Dell shipped out 19% more hardware units this quarter than it did a year earlier. But for various reasons, the average selling price slipped about 8% to land the total revenue improvement at 10.5%.
  • One of those reasons is proportionally higher sales in emerging markets like China, Russia, and Brazil, where low margins come with the territory.
  • While the GAAP numbers may look bleak, Dell is actually making more cash this year than last, including a much stronger structural cash flow of $833 million in the quarter.

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

Income Statement Highlights

Q4 2008

Q4 2007

Change

Sales

$15,989

$14,470

10.5%

Net Profit

$679

$726

(6.5%)

EPS

$0.31

$0.32

(3.1%)

Diluted Shares

2,201

2,251

(2.2%)

Get back to basics with the income statement.

Margin Checkup

Q4 2008

Q4 2007

Change*

Gross Margin

18.8%

17.1%

1.7

Operating Margin

4.9%

5.7%

(0.8)

Net Margin

4.2%

5.0%

(0.8)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q4 2008

Q4 2007

Change

Cash + ST Invest.

$7,972

$10,298

(22.6%)

Accounts Rec.

$5,961

$4,622

29.0%

Inventory

$1,180

$660

78.8%

Liabilities

Q4 2008

Q4 2007

Change

Accounts Payable

$11,492

$10,430

10.2%

Long-Term Debt

$362

$569

(36.4%)

The balance sheet reflects the company's health.

Cash Flow Highlights

Q4 2008

Q4 2007

Change

Cash From Ops.

$1,197

$1,221

(2.0%)

Capital Expenditures

$195

$330

(40.9%)

Free Cash Flow

$1,002

$891

12.5%

Owner Earnings

$833

$525

58.7%

Free cash flow is a Fool's best friend.

Competitive Context

Market Cap

Trailing P/E Ratio

CAPS Rating

International Business Machines (NYSE: IBM)

$158,540

15.9

***

Hewlett-Packard (NYSE: HPQ)

$123,190

16.1

****

Apple (Nasdaq: AAPL)

$112,740

28.1

***

Dell

$46,160

15.5

**

Sun Microsystems (Nasdaq: JAVA)

$15,160

20.0

***

Using the latest reported numbers from Capital IQ. Keep your partners close and the competition in your vest pocket.

Related Foolishness:

Fool by Numbers provides raw earnings information in a timely, convenient package. But since numbers never provide the whole story, check Fool.com for more in-depth discussion of the meaning behind the earnings.

Dell is both a Motley Fool Stock Advisor pick and a Motley Fool Inside Value recommendation, and Apple just joined the Stock Advisor gang. Get the "who, what, where, when, why, and how" with a free 30-day trial subscription to either newsletter.

At the time of publication, Anders Bylund had no position in any company mentioned. Fool rules are here.