Dell posted a higher-than-expected quarterly profit today, driven by cost cuts and strong demand from consumers and foreign markets, and its shares jumped nearly 10 per cent.
The world's second-largest personal computer maker which employs more than 4,500 people in Ireland pointed to the strong performance as evidence that a year-long turnaround led by founder Michael Dell, who returned to the chief executive post in January 2007, was yielding results.
Dell's unit shipment growth of 22 percent was the strongest in two years, though it said US corporate customers were keeping a tight grip on spending, a trend it expects to last through the summer.
Net income in the three months ended May 2nd rose to $784 million, or 38 cents per share, from $759 million, or 33 cents per share, a year earlier. Revenue was $16 billion, up 9 per cent from a year earlier.
Analysts had expected a profit of 34 cents per share, excluding special items, on revenue of $15.7 billion in its fiscal first quarter, according to averages of Wall Street expectations on Reuters Estimates.
"Michael Dell had a very slow start (to the turnaround). One quarter doesn't a trend make, but I'm willing to sit back and wait because it looks like he has gotten some traction, especially on the costs," said Kim Caughey, senior analyst with Fort Pitt Capital Group.
Operating expenses were 12.9 per cent of revenue, down a percentage point from the previous quarter, chief financial officer Don Carty said.
A share buyback program has also reduced the overall share count by 10 per cent over the past year, the bulk of that coming in the first quarter when it spent $1 billion for that purpose. Dell said it plans to spend at least another $1 billion to buy back shares in its second quarter.
"Dell's cost-cutting is starting to benefit margins," said Shannon Cross of Cross Research. "Now the company needs to show that they can maintain and gain market share beyond just benefiting from channel fill of their retail partners."