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Dell Second-Quarter Profit Falls Short

August 28, 2008
by Eric Savitz
Blogger and Columnist, Barron's

Eric Savitz

Dell (DELL) posted stronger-than-expected top-line growth in the fiscal second quarter ended Aug. 1, but it had lower-than-expected profits as margins missed Street expectations, and the stock is trading lower.

For the quarter, Dell posted revenue of $16.4 billion, ahead of the Street at $15.95 billion. But profits of 31 cents a share were a nickel shy of expectations. The company said profits were reduced by a about a penny a share from amortization of purchased intangibles, and another penny by business realignment costs. Dell said gross margins were “adversely affected by actions to drive growth in strategic areas like Global Consumer and EMEA, as well as an increase in deferred revenue from the sale of successful service offerings in EMEA, which will be recognized in subsequent periods.”

Gross margin in the quarter was 17.2 percent, down from 18.4 percent in the May quarter, and 20 percent a year ago.

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