Dell 2Q Profit Jumps 46 Percent to $733M

Dell 2Q Profit Jumps 46 Percent to $733M

By MATT SLAGLE
The Associated Press
Thursday, August 30, 2007; 6:21 PM

DALLAS -- Dell Inc. said Thursday that preliminary second-quarter
earnings jumped 46 percent on stronger sales of enterprise products and
services, improved average selling prices and favorable component costs.

The computer maker said it earned $733 million, or 32 cents per share,
in the three months ended Aug. 3, compared with $502 million, or 22
cents per share, a year ago. Sales rose 4 percent to $14.8 billion.

The results beat the prediction of analysts polled by Thomson Financial,
who expected earnings of 30 cents per share on sales of $14.63 billion.

The report comes as Round Rock-based Dell emerges from a yearlong
internal investigation into accounting misconduct.

Dell said it will have to reduce more than four years' worth of earnings
by up to $150 million for misleading auditors and manipulating results
to meet performance.

"While our results demonstrate we've made progress against our goals, we
are still in the early stages of transforming our company's structure,
costs and operations," Chairman and CEO Michael Dell said in a statement.

The earnings were dragged down a nickel per share, however, by a $102
million charge for compensation expenses related to payments for expired
stock options and $59 million in costs related to the internal probe.

The results did not include year-ago figures and remain preliminary
until Dell resolves an ongoing Securities and Exchange Commission
investigation into the accounting issues.

Dell still faces shareholder lawsuits, and federal prosecutors in New
York have also subpoenaed documents on the company's financial reporting
since 2002.

The positive earnings come after a rough year for Dell.

It began last August with a massive notebook battery recall and
continued with the accounting probe.

Then came a shake up of the company's top executive ranks, the loss of
its No. 1 position in the PC market to rival Hewlett-Packard Co.,
thousands of layoffs and, more recently, production delays for its new
line of colorful laptops.

Dell acknowledged a "higher-than-normal product backlog" due to
unexpectedly high demand for new Inspiron and XPS color notebooks, as
well as supply constraints for certain flat-panel displays.

But in Thursday's earnings, the company said it was focused on
opportunities that would "set the stage for a more sustainable balance
of liquidity, profitability and growth." Dell didn't hold the usual
conference call with reporters and analysts afterward to explain these
opportunities in more detail.

The direct-sales model, in which consumers and businesses buy Dell
products over the Internet or the telephone at a discount, helped bring
the company to the forefront of the PC business.

But Dell's dominance slipped, largely to competitors who offer systems
at retail.

To turn things around, Dell has begun dabbling with retail in
partnerships with Wal-Mart Stores Inc. in the United States, as well as
retailers in the United Kingdom and Japan.

Dell has also launched the new Vostro brand of computers targeting small
business, and it has expanded into the lucrative business of selling
services to go with the hardware.

Analysts said it was too early to see if Dell was finally on its way to
orchestrating a successful turnaround.

"It's kind of unfair to judge Dell this early on. It's a little like
trying to judge a horse race halfway down the course," Gartner analyst
Charles Smulders said. "Drawing conclusions at this point is premature,
dangerous even."

Andy Cross, a senior analyst at The Motley Fool, questioned Dell's
turnaround chances at this point. He said the recent supply issues
raised a red flag for a company trying to grow market share.

"Are they around the corner? Are they about to jump on the springboard
and go where they belong?" asked Cross, who owns Dell stock. "I'm
hopeful but I'm not betting the ranch on it."

Dell, which has 90,400 temporary and full-time employees worldwide, said
it would stop its share buyback program until it can file its backlog of
SEC reports. That's expected to happen in November.

Shares rose 60 cents, or 2.2 percent, to close at $28.46, then gained
another 13 cents in after-hours trading.

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On the Net:

http://www.dell.com
© 2007 The Associated Press

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Wow, I guess Mike's doing something right!