Dell's Profit Pinched (Update 2)

Dell(DELL Quote - Cramer on DELL - Stock Picks) blew past Wall Street's revenue estimates in its fiscal second quarter, but the company's efforts to stoke sales dented the bottom line, pushing net income down 17%.

Dell said the profit pressure was a result of decision to expand its sales to consumers across the globe as well as to customers in the Europe, Middle East and Africa region by cutting the prices of many of its products.

"Strategic actions to accelerate growth in certain areas of our business affected gross margins this quarter and there will likely be some non-linearity in the improvements in our operating income margins as we rebalance our portfolio, make cost improvements and drive growth," said CFO Brian Gladden in a statement.

Shares of Dell were off 10%, or $2.51, to $22.70 in extended trading Thursday.

In the three months ended August 1, Dell had sales of $16.4 billion, up 11% year-over-year and ahead of the average analyst expectation of $15.9 billion, according to Thomson Reuters.

Sales of notebooks -- the fastest growing segment of the PC market -- were up 26% year-over-year to $4.8 billion, roughly matching the growth rate posted by rival Hewlett-Packard(HPQ Quote - Cramer on HPQ - Stock Picks), which reported its quarterly earnings results earlier this month.

Founder Michael Dell, who returned to the CEO job last year, told analysts in a post-earnings conference call that the company has "reignited growth" in the PC business.

Since Dell's return, the company has upended many of its business practices, including for the first time making its PCs available for sale through retail outlets like Best Buy(BBY Quote - Cramer on BBY - Stock Picks)and Wal-Mart(WMT Quote - Cramer on WMT - Stock Picks).

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