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Dell Quarterly Profit Rises 27% But Misses Forecasts

Dell posted a 27 percent rise in quarterly profit but missed estimates and gave a cautious outlook, and its shares plunged.

Dell
AP
Dell

Shares of Dell tumbled more than 8 percent in late trading Thursday, after finishing up 1.63 percent at $28.14 during regular market hours.

The world's second-biggest personal computer maker reported earnings of $766 million, or 34 cents a share, on sales of $15.6 billion in the third quarter.

In the same period last year, Dell reported a profit of $601 million, or 30 cents a share, on a topline of $14.38 billion.

Dell said restructuring costs related to ongoing job reductions, investments in the business and acquisitions "may adversely impact the company's performance."

A slowing decline in component costs and a seasonal product-mix shift to U.S. consumer and international regions may also hurt results, Dell said.

Dell, based in Round Rock, Texas, was helped -- along with its larger rival Hewlett-Packard -- by falling prices for computer memory and other components, and by strong PC demand in U.S. back-to-school sales and pre-holiday gift spending.

The company in June began selling PCs in stores for the first time after 23 years of direct-only sales via phone or Internet.

"The disappointment here is that you didn't see a follow-through of revenue upside to earnings upside," said Brent Bracelin, an analyst with Pacific Crest Securities. "That's the disappointment, but the company is coming out of a two-year slump here and is still in turnaround mode. We'd like to see the expense side improve faster than it is."

Dell shares, up 10 percent this year through Wednesday, trade at 19 times estimated earnings per share for its fiscal year ending in January, compared with a multiple of 17 for HP's fiscal year ended in October and IBM's 2007 multiple of 15.

Analysts foresaw Dell earning 35 cents a share and garnering sales of $15.35 billion in the quarter, according to an estimate compiled by Thomson Financial.

-- Reuters contributed to this report.