SAN FRANCISCO (Reuters) –
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 world's No. 2 personal computer maker rose 7 percent 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.
"The results were strong across the board. You had revenue upside, gross margin upside, and of course earnings upside," said Ashok Kumar, analyst at Collins Stewart.
"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."
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.
But Dell reported gross margins of 18.7 percent, thanks to cost cuts, what it called "disciplined" 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 percent.
"Obviously it's a better-than-expected performance on the gross margin side," said Richard Kugele, analyst at Needham & Co.
"Slow, steady progress right now is good enough as far as I'm concerned."
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 Microsoft's new Windows 7 operating system, which is due in October.
"It'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."
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.
Excluding items, the company earned 28 cents a share, beating analysts' average estimate of 23 cents a share, according to Reuters Estimates.
Revenue fell 22 percent to $12.8 billion. Still, that was ahead of Wall Street's estimate of $12.6 billion.
Dell's enterprise businesses continued to struggle, while the public and consumer segments -- where units rose 17 percent -- showed more strength. The U.S. and Asia were stronger than Europe.
Laptop shipments were roughly flat, while revenue fell 21 percent. Desktop units fell 23 percent as revenue declined 33 percent. While the bulk of Dell's business comes in PCs, the company said it is gaining share in servers and storage.
Dell trails Hewlett-Packard in global PC shipments and is feeling the pressure from No. 3 Acer Inc, which is growing quickly thanks in part to strong netbook sales.
Earlier Thursday, Acer reported weaker quarterly results even as it sold more PCs, underscoring how low-cost netbooks are cannibalizing sales of its more expensive products.
Dell has been shedding jobs and cutting billions in costs to realign its business, and is working to shift its product base to higher-margin offerings and recurring revenue streams through partnerships and acquisitions.
For now, Dell remains heavily reliant on computer sales to small, medium and large businesses. Its finance chief cautioned that corporate "budgets are pretty much set" and thus enterprise demand would remain challenging.
But on a conference call with reporters, Chief Financial Officer Brian Gladden said there were "some pockets of improved demand," particularly in the consumer sector.
"Consumer will continue to be pretty good for as we continue to gain share there and I think those markets are improving," he said.
Shares of Round Rock, Texas-based Dell closed up 6.7 percent at $15.65 on Nasdaq and rose another 2.7 percent in extended trading to $16.08.
(Reporting by Gabriel Madway; Additional reporting by Ritsuko Ando in New York; Editing by Richard Chang and Steve Orlofsky)
NEW YORK (Reuters) –
U.S. stocks closed higher on Thursday as investors turned back an early sell-off, thanks to a rebound in oil prices.
The Dow posted its eighth straight gain, led by Boeing Co (BA.N), which rose 8.4 percent to $51.82. The U.S. aircraft manufacturer said its long-delayed 787 Dreamliner would make its first flight by the end of the year.
For the first three days of the week, stocks rose early and fell later, but the pattern reversed on Thursday as shares built momentum throughout the session in tandem with assets identified with improved demand, such as crude oil.
U.S. front-month crude oil prices rose $1.06 to settle at $72.49 a barrel, after dipping as low as $69.83 earlier in the day.
"The market turned around when oil took off," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams in New York.
"Energy stocks were getting hit, and when they took off, the energy stock rally brought the whole market up."
ConocoPhillips (COP.N) ended up 0.3 percent at $45.73.
The Dow Jones industrial average (.DJI) gained 37.11 points, or 0.39 percent, to end at 9,580.63. The Standard & Poor's 500 Index (.SPX) added 2.86 points, or 0.28 percent, to 1,030.98. The Nasdaq Composite Index (.IXIC) rose 3.30 points, or 0.16 percent, to 2,027.73.
Once again, trading was dominated by a handful of troubled financial companies. The stock of bailed-out insurer American International Group Inc (AIG.N) surged nearly 27 percent to $47.84 after the new chief executive, Robert Benmosche, told Reuters on Wednesday he did not favor a fire sale of its assets.
AIG's new CEO also said in the interview that in a year, people will say the company is performing well.
AIG's stock price has spiked since the beginning of August in a rally initially spurred by the insurance giant posting its first profit in seven quarters. Analysts have also cited a short squeeze as contributing to the run-up as short investors have given up on bearish bets.
According to data from the New York Stock Exchange, short interest in AIG fell 2 percent in the first half of August, compared with the end of July. About 18 percent of the stock is held short.
Citigroup Inc (C.N) also jumped 9.1 percent to $5.05 on a report that hedge-fund manager John Paulson is buying the troubled bank's shares.
An S&P index of financial shares gained 1 percent to 197.83.
Dell Inc (DELL.O) was one of the Nasdaq's top gainers, up 6.7 percent at $15.65 after reporting better-than-expected profit and sales just before the market closed.
Analysts have pointed to light summer volume and caution over a potential pullback as the reason for the market's lackluster performance this week.
Adding to that caution are concerns that an economic recovery may end up being weaker or slower than originally anticipated. Expectations of a recovery have fueled a months-long rally that has pushed the S&P 500 up more than 50 percent from March's 12-year closing low.
Volume was light on the New York Stock Exchange, with 1.16 billion shares changing hands, below last year's estimated daily average of 1.49 billion. On the Nasdaq, about 2.16 billion shares traded, also below last year's daily average of 2.28 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of roughly 8 to 7.
On the Nasdaq, though, the opposite trend held sway: About 14 stocks fell for every 13 that rose.
(Additional reporting by Herb Lash; Editing by Jan Paschal)
OAKLAND, Calif. – Specialty home retailer Cost Plus Inc. said Thursday its fiscal second-quarter loss narrowed as the company cut costs to offset lower sales of big-ticket items such as living room and dining room furniture.
Its loss for the quarter that ended Aug. 1 narrowed to $20.8 million, or 94 cents per share, from $26.6 million, or $1.21 per share, in the same period a year earlier.
Revenue fell 13 percent to $183.4 million from $210.7 million last year.
Sales in Cost Plus stores open at least one year, a key retail metric known as same-store sales, fell 10.9 percent during the quarter. The company had forecast a same-store sales decline between 9.5 percent and 14.5 percent.
It said same-store sales fell because the average ticket per customer fell 8 percent — mainly due to lower dining and living furniture sales — and because 3.4 percent fewer shoppers made it to the checkout.
Retailers have reduced their inventory of more expensive items such as furniture to cut costs amid the recession.
Selling, general and administrative expenses fell 15 percent because of other cost-cutting measures such as closing stores, which lowered payroll, and trims in advertising and other expenses.