Updated from Thursday, Nov. 19NEW YORK, ( TheStreet) -- Dell ( DELL) missed its targets and now has its fingers crossed for a strong Christmas season. The slumping PC giant posted adjusted earnings, excluding $63 million in one-time losses, of 23 cents a share, down from 37 cents in the year-ago quarter and below the 28-cent profit target analysts had, according to Yahoo! Finance. Sales for the quarter ended last month were $12.9 billion, down 15% from the $15.2 billion level last year, and missing the $13.5 billion mark analysts were looking for. Gross margins shrunk an astonishing 1.4 percentage points to 17.3% in the quarter from 18.7% in the prior quarter. The slip shows that cost cuts have not kept up with falling sales. Dell struggled last year as it tried to shift its strategy away from its direct sales model to more of a retail approach. But the company lost its top sales position to Hewlett-Packard ( HPQ), which capitalized on strong demand for notebooks. Dell's shares fell more than 6% to $14.91 in after-hours trading Thursday. The stock is up about 55% this year after investors bet on the PC giant as a big turnaround candidate. "We are seeing improvement in overall underlying IT demand that is continuing into the fourth quarter," CEO Michael Dell said in a press release. Looking ahead, Dell says it expects holiday PC sales to be the strongest segment of its business, but it only guided for revenue to "improve over the third quarter."