Dell Delivers, and Big


To say there was optimism heading into the Dell earnings this evening would be an understatement, with shares up about 33 percent over the past few months. Dell delivered, and big.

The company, apparently on the verge of bursting, trying to keep in the good news for even a few seconds longer, took us all by surprise by releasing the quarterly figures moments BEFORE the closing bell. To say we had to scramble would grossly underestimating what was happening behind the scenese around here! Look, Dell has been through the wringer, suffering margin pressure, declining sales, and major market difficulties, but it seems to be rounding the bend, and turning things around. Execution, he says ironically, is alive and well in Round Rock.

Dell reported 24 cents a share, but that included 4 cents in expenses that no one was really counting on, so Dell really would have reported 28 cents a share, or a nickel better than Wall Street anticipated. That news came on better than expected revenue of $12.8 billion. Analysts said they needed to see improvement on the topline, and a corresponding improvement on the bottom line so that Dell's improvement wasn't merely coming from those lower-priced, lower-margin netbooks driving so much of the industry right now. Dell's 18.7 percent gross margin also beat estimates.

On a unit by unit basis, large enterprise revenue was in line at $3.3 billion, but that's actually good news since there's been so much worry that IT spending was continuing to contract. Public revenue was slightly disappointing at $3.8 billion, versus the $4 billion expected by FTN Midwest's William Fearnley; but with so many state governments and schools hurting and running deep budget deficits, the softness there is hardly surprising. Small and medium business beat some estimates at $2.8 billion versus the $2.7 billion expected; and the surprising highlight of the story came from the consumer part of the business, with Dell reporting $2.9 billion versus the $2.6 billion expected. Dell rival Hewlett-Packard also reported gains among its consumer business, which might also be a nod to the netbook trend.

Dell seems to be executing well on a massive cost-cutting and turnaround strategy. Investors liked what they heard, driving shares up another 6 percent as soon as the numbers hit the tape. Earlier, I posted concerns that Dell would have to print some pretty good news in order to justify the big run-up in these shares ahead of the news tonight. It appears this company was more than able to deliver.

Are you an investor in Dell? Are you adding to your position, selling it off, standing pat, and why? Post your comments below and let me know!

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