Dell surpasses earnings expectations

Michael Dell led his group to better-than-expected quarterly earnings days after 25 per cent of Dell shareholders supported a protest to strip him of his board chairmanship.

Shareholders of Dell, the third-largest PC maker, were seeking independent oversight of the board after Mr Dell and the company settled separate fraud complaints with the Securities and Exchange Commission.

Dell second-quarter results - from May toJuly 31 2010
SalesNet profitEarnings per shareDividend

Dell’s second-quarter revenue and profit were both up, beating expectations.

Strong sales of servers and networking equipment helped revenues rise 22 per cent to $15.5bn.

Net income was $545m, or 28 cents a share, compared with $472m, or 24 cents a share, a year earlier.

The company forecast higher-than-expected sales for the coming quarter, a sign that technology spending was rebounding.

However, Dell’s gross profit margin missed expectations as a result of high component costs and the company warned of weak consumer spending, sending shares down in after-hours trading.

Dell executives said spending by large companies was strong and was likely to remain so.

“Demand trends continue to be favourable,” Mr Dell said.

Brian Gladden, chief financial officer, said: “The corporate refresh cycle is continuing” and component costs should fall later in the year, improving margins.

Dell’s results were matched by relatively strong earnings on Thursday from Hewlett-Packard, the largest PC maker.

But both companies’ sunny results were clouded by last week’s poor showing from Cisco, the largest maker of networking equipment. Cisco, which reports earnings earlier than other technology companies and is considered a bellwether, missed expectations.

John Chambers, chief executive, warned of “un­usual uncertainty” in the economy, and the results indicated that the recovery was slowing and that enterprise spending was contracting after surprisingly brisk growth this year.

Thursday’s results may allow Dell to turn a page on last week’s shareholder revolt. The SEC had alleged that Dell and its founder failed to disclose payments from Intel in return for an exclusive agreement to use that company’s chips in Dell computers.

Dell paid $100m to settle the claim and Mr Dell paid $4m personally, though neither admitted the charge.

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