Thu, May 19, 2011 - Page 10 News List

Dell raises outlook, stock rallies as profits rebound

Reuters, NEW YORK

Dell Inc computer inventory sits on a shelf on Monday at a Best Buy Co Inc store in Orem, Utah.

Photo: Bloomberg

Dell Inc posted profits that blew past Wall Street forecasts on improved profitability and the No. 2 PC maker raised its fiscal 2012 outlook for operating income, citing expectations for a robust back-to-school season and strong government spending.

Dell’s gross margin was 22.9 percent in the quarter, above the average forecast of 20.35 percent, driven by the strength in its enterprise business that includes servers and storage.

The company expects its public sector business to get a boost from stronger spending among state and local governments and education customers as they close out their fiscal year.

Revenue in the fiscal first quarter ending on April 29 rose to US$15 billion from US$14.87 billion a year ago, but fell short of the average analyst estimate of US$15.4 billion according to Thomson Reuters I/B/E/S.

Shares of Round Rock, Texas-based Dell jumped 5 percent in extended trading after closing down 0.63 percent at US$15.90. The shares were initially halted in after-hours trading.

The better-than-expected results are in sharp contrast to larger rival Hewlett-Packard Co’s (HP), which disappointed investors by cutting its profit outlook, -sending its shares down more than 7 percent.

HP on Tuesday cut its outlook for full-year profit, excluding items, to “at least US$5 per share” from a previous “US$5.20 to US$5.28.” It also cut its full year revenue outlook to US$129 billion to US$130 billion from a previous US$130 billion to US$131.5 billion.

Dell still generates most of its revenue from selling personal computers, but is moving to diversify its revenue base, given the weakened demand in the consumer PC market.

Dell wants to become a larger player in the data center equipment market and gain a toehold in the fast-growing mobile space with tablets and smartphones, but faces stiff competition in those markets from the likes of International Business Machines Corp and HP.

Dell chief financial officer Brian Gladden said in an interview that the consumer PC business during the quarter fell short of company expectations, citing tablets as a factor.

Dell reported a net profit of US$945 million, or US$0.49 a share, up from US$341 million, or US$0.17 a share, a year ago.

Excluding items, Dell earned US$0.55 a share, handily beating the average estimate of US$0.44 a share according to Thomson Reuters I/B/E/S.

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