Dell Quarterly Earnings Fall On Weak Gross Margins

Round Rock, TX (AHN) - Dell Inc. reported fiscal third quarter earnings on Thursday that fell 17 percent as lower gross margins cut into strong overall revenue.

The personal computer giant had second quarter earnings of $616 million or 31 cents a share, compared with $746 million or 33 cents a share in the same period a year ago. Revenue rose to $16.43 billion, up 11 percent from last year.

Excluding one-time costs, Dell posted earnings of 33 cents a share. The result was short of analyst estimates of 36 cents a share, according to Reuters Estimates.

Dell saw strong growth in notebook PC sales, up 26 percent to $4.87 billion from last year. Software sales were robust as well, up 17 percent to $2.8 billion from a year ago.

However, revenue gains were offset by falling gross margins. Total profit margin fell to 17.2 percent, down 2.7 percent from 19.9 percent last year.

"Strategic actions to accelerate growth in certain areas of our business affected gross margins this quarter," said Chief Financial Officer Brian Gladden, according to Reuters. "Cost cuts, changes to its portfolio of products and an effort to push sales outside of U.S. and European markets would also impact operating margins," he added.

Dell also said they see weakness in information technology spending in overseas markets such as Asia and Western Europe.

Shares of Dell fell 9.9 percent in Thursday afterhours trading.