Skip to main content

Shares of


(DELL) - Get Dell Technologies Inc. Class C Report

slipped Friday despite the company's announcement of better-than-expected

third-quarter earnings

late Thursday.

Even as the


crept up 0.5%, the PC maker's stock was recently down 46 cents, or 4.69%, to $9.35.

Dell, like other tech companies, is wrestling with an increasingly


spending climate, although the company sought to calm investors during a conference call to discuss its results.

"We continue to make significant progress against our cost initiatives," said Brian Gladden, the Dell CFO, during the call late Thursday. "Our initiatives to improve competitiveness and reduce costs are bearing fruit."

Gladden explained that Dell's third-quarter operating expenditure was down by over $200 million vs. the same period last quarter of last year. Net of acquisitions, the company also had reduced its headcount by almost 11,600 during the same period, he said.

Dell increased its reliance on contract manufacturers in an effort to drive down third-quarter costs, avoided some low-margin deals, and is also reaping the benefit of falling component costs. As a result, the company's third-quarter gross margin increased to 18.8% from 18.5% in the same period last year.

Robert W. Baird maintained its neutral rating on Dell in a note released Friday, but acknowledged the firm's progress in a tough spending environment. "We are encouraged by progress on Dell's turnaround initiatives and would look to become more constructive if current operating profitability improvements prove sustainable," wrote analyst Jayson Noland.

Scroll to Continue

TheStreet Recommends

Despite missing analyst revenue estimates by more than a $1 billion, Dell reported better-than-expected profit. The computer maker posted net income of $727 million, or 37 cents a share, compared with earnings of $766 million, or 34 cents a share, in the same period last year. Analysts had estimated earnings of 31 cents a share.

Dell's third-quarter operating income was just over $1 billion, up from $829 million in the prior year's quarter.

Chief Executive Michael Dell highlighted a number of technologies as key focus areas for the company during Thursday's conference call.

"Virtualization, particularly in servers and storage, is a key technology that we're embracing," he said, explaining that Dell will expand the reach of its server business next year.

Dell, which competes with

Hewlett Packard

(HPQ) - Get HP Inc. Report



(IBM) - Get International Business Machines Corporation Report




, certainly needs to breathe new life into its servers and storage. The company's third-quarter sales of servers and networking equipment declined 5% year over year and storage revenue was flat.

Even Dell's desktop PC business, which grew 14% compared to the same period last year, is heading into uncertain waters. The tech analyst firm iSuppli, for example, recently cut its 2009 and 2010 PC growth forecasts.

Quizzed about the PC market by an analyst, Michael Dell refused to even "hazard a guess" on the possibility of negative growth next year, underlining the


nature of the economy.

As usual, Dell did not provide specific financial guidance for the current quarter.

Robert W. Baird reduced its revenue estimates for Dell's fiscal 2010 from $65.8 billion to $60.8 billion. Citing reduced demand and a challenging environment, the analyst also reduced its Dell price target from $1.44 to $1.35.