Dell beats Wall St. estimates

Shares of No. 2 PC maker rally on better-than-expected earnings results.

By Grace Wong, staff writer

NEW YORK ( -- Dell reported preliminary earnings well above Wall Street's expectations Tuesday, sending shares of the PC maker soaring in extended trading.

The No. 2 PC maker reported net income of $677 million, or 30 cents a share, for its fiscal third quarter ended Nov. 3. In the year-ago period, Dell reported net income of $606 million, or 25 cents a share.

Dell shares (blue) have lagged far behind the Nasdaq composite (yellow) this year.

Analysts surveyed by Thomson Financial had expected earnings of 24 cents a share.

Dell shares surged 9 percent in after-hours trading on the better-than-expected results, which were reported after the market close.

Dell said revenue in the latest period rose 3.3 percent to $14.4 billion, roughly in line with forecasts.

Round Rock, Texas-based Dell (Charts) was scheduled to report earnings on Nov. 16 but delayed those results amid an ongoing investigation by the Securities and Exchange Commission.

That investigation into the company's accounting practices was raised from informal to formal status last week.

Dell did not host a conference call to discuss its latest earnings results with analysts.

Dell, which lost the top spot in the computer market to rival HP (Charts) during the calendar third quarter, posted strong results in Asia and emerging markets.

Shipments in Asia-Pacific and Japan grew 23 percent during the period. Europe, Middle East and Africa shipments rose 9 percent. In contrast, shipments in the Americas fell 4 percent.

Dell has been losing share in the mature markets as consumers have turned to buying laptops over desktops.

Dell said desktop shipments fell 5 percent. Desktops, the company's core business, contributed $4.7 billion in revenue during the quarter.

Dell, which has struggled to build its consumer relationships, was dealt a setback in August, when it recalled more than 4 million notebook batteries made by Sony (Charts) due to fire risk.

Dell's sales have been lackluster, but the company should get a boost from the launch of Vista, the newest update of Microsoft's (Charts) Windows operating system, down the road, said Kim Caughey, an analyst at Fort Pitt Capital Group, which owns shares of Dell.

"We think there will be compelling reasons for businesses to buy Vista, and Dell should benefit from that," she said.

Vista is due to ship to business customers at the end of the month and to consumers in January.

Troubles have hammered Dell's stock, which has tumbled about 18 percent so far this year. In contrast, shares of rivals IBM (Charts), Apple (Charts) and HP have all posted double-digit gains in 2006.

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