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Dell, the world’s second-biggest personal computer maker, on Tuesday shook free from the doldrums as margin improvements led profits to beat expectations in the third fiscal quarter.
Shares in the company rose 9.7 per cent in after hours trading after Dell said it had made a net income of $677m in the quarter, or 30 cents a share, an increase of 11.7 per cent over the same period last year.
The performance, which handily beat Wall Street estimates, was driven by a pickup in profitability at the company, which has been struggling to right itself after months of missteps.
Looking ahead, Dell said its efforts to achieve a better balance between profitability and growth were “starting to take hold.” However, it cautioned that “improvement in growth and profitability may not be linear” in the short-term.
Sales fell short of most analyst estimates, however. Revenues for the quarter were $13.4bn, an increase of 3.6 per cent over the year before but far below Dell’s typical growth rate before this year of 15-20 per cent. But operating margin – a key measure of a company’s profitability, was 5.7 per cent, up from 5.4 per cent one year ago and up from 4.3 per cent in the previous quarter.
Dell stressed that its results were preliminary and could change pending the outcome of an accounting investigation that has forced the company to delay filing its quarterly reports with the Securities and Exchange Commission.
The accounting problems, which led Dell to delay its quarterly results last week, have added to pressure caused by pricing mistakes, an erosion in cost advantage and a resurgence at Hewlett-Packard, Dell’s main rival that had left the computer maker licking its wounds for much of the year.
Dell provided no new information about the investigation in its accounts on Tuesday. In a filing, it repeated previous statements that the SEC and the US attorney in the southern district of New York had launched probes of “certain accounting and financial reporting matters”.
Dell on Tuesday repeated earlier warnings that it would be unable to predict the amount and nature of any accounting restatements, should they be required.
It said it had begun to see results from a $150m effort to improve customer service, which has emerged as a key point of competition among PC makers.
The company did not provide guidance for the coming quarter.
Shares in Dell had risen 0.7 per cent on Tuesday to $24.82 ahead of the results, still well below their high of $41.29 in July last year.