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Dell's Profit Jumps, but Margins Narrow

Dell posts a 52% rise on its bottom line, but gross margins were narrower.

Updated with Friday's premarket trading



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said its profit rose 52% in the first quarter from a year ago, but gross margins narrowed enough for investors to continue selling off the company's stock.

In premarket trading Friday, Dell shares were at $13.96, down from the closing price Thursday of $14.32.

Stripping out items, Dell said its adjusted earnings came to 30 cents a share, just topping the consensus estimate among Wall Street analysts of 27 cents a share.

Net income including items came to $441 million, or 22 cents a share, up from last year's $290 million, or 15 cents a share.

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Revenue rose 25% to $4.2 billion.

The year-over-year strength came from rebounding sales to businesses, as well as services sales to the public sector, Dell said.

Gross margins, however, were squeezed to 16.9% from 17.6% a year ago, which appeared to spook investors.

"The company believes it is seeing the early stages of a corporate IT refresh," the "outlook" portion of Dell's quarterly release read.

"Overall, Dell expects a normal, seasonal sequential demand pick-up in the low single digits in its second quarter," the statement continued. "In addition, the company expects some components to remain in tight supply for the next couple quarters and some volatility in global currencies."

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.