This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Dell Dodges Spending Bullet, Shares Surge

ROUND ROCK, Texas ( TheStreet) -- Investor fears that Dell (DELL) would suffer the same fate as Cisco( CSCO - Get Report ) were quashed after market close on Thursday when the computer maker reported solid third-quarter results.

Dell's gross margin was the highlight of the quarter, coming in at 19.2%, well above Wall Street's estimate of 17.5%, and helping to deliver a significant earnings beat. Investors were clearly breathing a big sigh of relief on Friday; the company's stock was up 54 cents, or 3.92%, to $14.20 in pre-market trading.

"We expect the stock to trade up on the gross margin recovery," explained Jayson Noland, an analyst at Robert W. Baird, in a note released on Friday. "We continue to see opportunity in Dell for value-oriented investors at current levels driven by a corporate client refresh."

Dell attributed its gross margin to supply chain improvements, pricing discipline and reduced component costs. The No. 2 PC maker also provided a stark contrast to Cisco's first-quarter results last week, which sent shockwaves through the entire tech sector.

Cisco's IT spending struggles failed to materialize for Dell, despite its massive public sector business. The Texan firm's public revenue came in at $4.4 billion, an increase of 20% on the same period last year. Speaking during a conference call, Dell CFO Brian Gladden noted a tougher government spending environment in Europe, similar to Cisco, but said that this was offset by stable demand in the U.S.

Gladden also pointed to "a hardware refresh amongst our largest corporate accounts," adding that the company's high-margin server and storage businesses grew 20% and 7%, respectively. Dell's services business, another high-margin area, grew 55% to $1.9 billion, driven largely by the firm's Perot Systems acquisition.

Overall, Dell's large enterprise business generated revenue of $4.3 billion, a 27% hike on the prior year's quarter. CEO Michael Dell said he sees plenty of opportunities ahead. "There is still a large installed base on non-Windows 7 PCs that will be replaced by Windows 7 PCs," he said during the conference call. He also cited virtualization and Microsoft (MSFT) Exchange as growth drivers.

The firm did give rather tepid fourth-quarter guidance, citing muted consumer growth. Dell predicted revenue inline or slightly up on the third quarter's $15.4 billion; analysts surveyed by Thomson Reuters had forecast sales of $16.28 billion. Investors largely shrugged this off, however.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DELL $0.00 0.00%
CSCO $26.86 0.00%
HPQ $11.71 0.00%
AAPL $94.98 -0.21%
FB $116.77 -0.56%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs