Dell Cutbacks Pay Off

Updated from May 31

Dell's(DELL Quote) shares rose 5% Friday after the PC maker set plans to slash its workforce.

The Round Rock, Texas, company said first-quarter results were boosted by cheaper component parts and strong corporate sales. But the company, now under the leadership of founder Michael Dell, drew Wall Street's applause by taking the ax to costs amid a continuing tough pricing environment.

Most significantly, Dell will cut headcount by about 10% over the next 12 months. The reductions will vary across geographic regions, customer segments, and functions.

Dell said it had first-quarter net income of $759 million, or 34 cents a share, vs. $762 million, or 33 cents a share at this time a year ago. Analysts expected Dell to earn 26 cents a share, according to Thomson Financial.

The PC maker said revenue in the first quarter grew 2.8% year over year to $14.6 billion. While the growth pales when compared to the double-digit rate Dell regularly notched not long ago, it was better than expectations on Wall Street, which had called for sales to decline year over year to $13.95 billion.

Shares of Dell were recently up $1.49, or 5.5%, to $28.40 in recent after-hours trading.

"The results are surprisingly strong," said American Technology Analyst Shaw Wu.

Corporate spending on technology in the U.S. isn't exactly robust these days, Wu noted, yet that's exactly where Dell found much of its growth in the recent quarter.

Sales of servers were up 19% year over year and storage sales increased 13%.