Dell results better than expected

Dell Inc reported a stronger-than-expected profit,showing it was better able to cut costs.

Dell Inc reported a stronger-than-expected quarterly profit on Thursday,showing it was better able to cut costs and protect prices on its products than analysts,or its own executives,had predicted.

Shares of the world8217;s No. 2 personal computer maker rose 7 per cent after the earnings announcement,which preceded the close of stock market trade by a few minutes,as investors welcomed signs that its business is stabilizing.

Dell,which was stung earlier and more acutely than some other large IT firms by the downturn in enterprise spending,said it expects second-half revenue to come in stronger than the first,assuming current trends hold.

It also continued to sound bullish on a robust corporate refresh cycle starting next year,as big companies move to replace aging hardware.

8220;The results were strong across the board. You had revenue upside,gross margin upside,and of course earnings upside,8221; said Ashok Kumar,analyst at Collins Stewart.

8220;They were faced with a fairly difficult demand environment,along with pricing pressure,and it seems the company was able to navigate the those cross currents fairly successfully.8221;

Analysts credited better-than-expected margins for the surprising results,after Dell warned just six weeks ago that higher component costs and a competitive pricing environment,would eat into margins.

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But Dell reported gross margins of 18.7 per cent,thanks to cost cuts,what it called 8220;disciplined8221; pricing,an increase in enterprise sales from the first quarter and a 69 million buyout of a revenue-sharing agreement by a vendor.

Wall Street had expected 17.7 per cent.

8220;Obviously it8217;s a better-than-expected performance on the gross margin side,8221; said Richard Kugele,analyst at Needham amp; Co.

8220;Slow,steady progress right now is good enough as far as I8217;m concerned.8221;

On a conference call with analysts,Chief Executive Michael Dell said the company is expecting a strong replacement cycle starting in 2010,helped in part by Microsoft8217;s new Windows 7 operating system,which is due in October.

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8220;It8217;s not all going to come in the first month or the second month,but over the course of the year,there will be a big refresh cycle.8221;

For its second quarter,which ended July 31,Dell reported a net profit of 472 million,or 24 cents a share,down from 616 million,or 31 cents a share,in the year-ago period.