Dell Fails to Delight

"We embarked this year on a long-term strategy to reignite growth and our Q3 results indicate we're making solid progress," Dell said.

He highlighted five key areas that Dell will build its comeback on: consumer, emerging countries, notebooks, enterprise and small/medium business.

The company has already taken various steps to accelerated its growth in some of these areas, including striking retail distribution deals to sell PCs at Wal-Mart(WMT) and Staples(SPLS).

But Dell acknowledged that its U.S. consumer business revenue declined 6% during the quarter.

Dell's gross margin also declined 140 basis points sequentially to 18.8%, despite the fact that the prices of key PC components, such as DRAM memory, continued to be under heavy pressure during the quarter.

Dell said notebook PC sales jumped 19%, while its server and storage revenue each increased 8%.

Meanwhile, Dell's operating expenses increased to 13.5% of revenue from 11.5% at this time last year. And while Dell has previously talked of cutting its headcount by 10%, management indicated the layoffs may not equate to a net reduction of 10% given recent acquisitions and growth priorities.

"We're making solid progress in operating expense discipline, but at same time we're evolving the business model to a more value added services and products model," said finance chief Don Carty.

Dell ended the quarter with almost $15 billion of cash on its balance sheet. But the company provided no clues about the magnitude of its frozen-stock buyback program, which is expected to resume in December.

"We recognize we have a lot more cash on our balance sheet than we believe to be ideal," said Carty.

>To order reprints of this article, click here: Reprints