Dell Profit Dazzles

Shares soar after the PC maker shreds estimates.
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Updated from 7:16 a.m. EST

Embattled

Dell

(DELL) - Get Report

delivered a major upside surprise Tuesday, blowing past Wall Street's third-quarter earnings expectations.

Shares rose 10.4% in early action Wednesday to $27.40, breaking out of a long slump brought on by the company's growth slowdown and financial missteps.

The company said it posted net income of $677 million, or 30 cents a share, beating the Thomson First Call analyst estimate of 24 cents a share.

A year ago, Dell earned $606 million, or 25 cents a share, in the third quarter last year, which was hurt by $442 million in charges Dell took to repair a faulty computer component as well as costs related to restructuring.

Revenue for the latest quarter was right on the analysts' mark at $14.4 billion, an increase of 3.6% year over year.

The earnings release, more than a week late, was called preliminary and didn't contain much of the detailed information that investors generally expect and the company declined to hold the customary conference call with analysts and reporters.

The quarter was delayed as a result of an investigation by the

Securities and Exchange Commission

into Dell's accounting practices. On Sept. 11, the Round Rock, Texas-based PC maker said it had found problems with its "accruals, reserves and other balance-sheet items" that could affect its past financial results.

Indeed, the company did not even present year-ago results in its earnings release, but year-over comparisons wasn't foremost in investors' minds. "Right now, no one cares," said one analyst, speaking privately. "Everyone is focused on the six-cent beat."

Dell no longer gives specific quarterly guidance but did say: "the actions it has taken to drive improved operating and financial performance long-term with a better balance of liquidity, profitability and growth are starting to take hold. However, in the near term, improvement in growth and profitability may not be linear due to a variety of factors, including the timing of continued investments in customer experience, global expansion, and new product introductions, as well as a muted seasonal uplift due to changes in the mix of product and regional profit."

Separately, Dell gained a bit of share in the critical market for servers during the quarter and increased its revenue in the segment by 10.9% to $1.4 billion, according to a report published Tuesday by market research company Gartner. The company's share of the market (as measured by revenue) rose to 10.8% from 10.2% in the same quarter last year.

According to Gartner, the share gain came at the expense of

IBM

(IBM) - Get Report

which lost about 1 point of share. Even so, Big Blue leads the segment with a share of 33.7% and it grew server revenue by 7.4% to $4.38 billion.

The strong showing in the server market was especially welcome since Dell had its slowest PC shipments ever in the three months between July and September, according to Gartner. And adding insult to injury, the company lost its No. 1 spot to rival

Hewlett-Packard

(HPQ) - Get Report

.