Dell Can't Match HP's Sales, Earnings Results

Michael Dell, chairman and CEO, said the company performing well, while facing a tough economic climate. "Our business model adapts quickly to economic changes, even the kind of significant challenge we saw in the third quarter," Dell said in a statement.

Dell is continuing to focus on five growth areas: notebooks, enterprise, global consumer, SMB and emerging countries, according to the company. Dell did not provide guidance for the current quarter, but in its statement it said global IT end-user demand will continue to be challenging.

Dell, Round Rock, Texas, earned $727 million, or 37 cents per share, on $15.16 billion in sales for the quarter. In the year-ago quarter, Dell earned $766 million or 34 cents per share on $16.43 billion in sales. In the quarter, Dell spent $400 million to buy back 21 million shares.

Analysts had been expecting earnings of 31 cents per share on $16.22 billion in sales for the third quarter. Earlier in the week, HP said its fourth quarter revenue would jump 19 percent and earnings 4 percent, year-over-year.

Dell benefitted from an aggressive stock buyback program in the quarter, that helped increased its earnings per share.

"The company will continue to incur costs as it realigns its business to improve competitiveness, reduce headcount in certain areas and invest in infrastructure, growth opportunities and acquisitions," the company said in a statement.

Sales of desktop PCs declined 14 percent year-over-year. Servers and networking products fell 5 percent for the same periods. Three categories: services, mobility, and software and peripherals saw year-over-year increases of 7 percent, 3 percent and 2 percent, respectively. Storage sales were relatively flat.

Mobility products accounted for 32 percent of sales, desktops 27 percent, software and peripherals 17 percent, servers and networking 10 percent, services 10 percent and storage 4 percent.

Revenue for the Americas fell 8 percent compared to the year-ago quarter and accounted for 48 percent of all sales.

For the current quarter, ending January 2009, analysts are expecting earnings of 31 cents per share on $15.92 billion in sales, which is $70 million less in sales than the company reported in the year-ago quarter. Dell shares closed at $9.81 Thursday, down 54 cents per share or 5 percent.

In a Q&A posted on Dell's Web site, Dell CFO Brian Gladden said the company has decided to keep its Dell Financial Services arm, rather than sell it.

"A very thorough strategic assessment of DFS clearly showed that the best option for our customers and Dell was to continue to own that business," Gladden said in the Q&A. "DFS is a strategic asset for Dell and drives incremental sales and margin. It is profitable for us in the current economic and credit cycle and we will continue to effectively manage credit and funding risk. We intend to invest in DFS technology, people and product capability."