The grabber is the company’s improved margin performance. Dell reported a gross margin for the quarter of 17%, which was up from 15.5% one quarter earlier. Operating margin came in at 5.7%, up from 4.3% in the previous quarter.
The expectation on the Street was that Dell would pull back from its aggressive drive for market share and focus instead on improving profitability, and in fact it seemed to do just that. Desktop PC revenue fell to $4.7 billion, from $4.9 billion one quarter earlier, offsetting improvement in the “mobility” segment, which includes laptops, to $3.9 billion, from $3.7 billion. The numbers this afternoon should help calm fears that the company was spinning out of control, following the delay of third quarter results - which had originally been scheduled for November 16 - the ongoing investigations into the company accounting practices, and its loss of market share to Hewlett-Packard (HPQ).
The company reported 23% year-over-year unit growth in the Asia Pacific and Japan region versus a year earlier; unit growth was up 9% in Europe, but down 4% in the Americas. Sequentially, revenue was flat in both the Americas and Asia/Pacific, but higher in Europe, to $3.3 billion, from $3.0 billion.
Dell did not provide any hard numbers on future quarters. Instead, it provided hints that the next quarter might not provide as much sequential upside as this one:
The company said that the actions it has taken to drive improved operating and financial performance long-term with a better balance of liquidity, profitability and growth are starting to take hold. However, in the near term, improvement in growth and profitability may not be linear due to a variety of factors, including the timing of continued investments in Customer Experience, global expansion, and new product introductions, as well as a muted seasonal uplift due to changes in the mix of product and regional profit. In addition, the fourth quarter of fiscal year 2006 included one extra week.