Dell Sinks Despite Solid Results

Dell shares fell 7% late Thursday despite much better than expected quarterly sales, as traders focused on margin pressures and a cautious outlook from the company.

Dell’s third-quarter sales rose 9% from the year-ago quarter to $15.65 billion, well ahead of $15.34 billion estimates. But pro forma earnings of 35 cents a share merely met Wall Street estimates, raising pricing concerns.

Dell said it no longer will provide guidance, and the little it gave was cautious: “near-term results could be adversely impacted by a slower decline in component costs and a seasonal shift in mix to U.S. consumer and international regions,” the company said. Dell also said it may engage in further restructuring and headcount reduction.

Mobility product sales rose 19%, while server and storage sales rose 8%. Desktop sales were off 1%, “as the industry continues to shift towards mobility,” the company said.

“We embarked this year on a long-term strategy to re-ignite growth, and our Q3 results indicate we’re making solid progress through investments in five key business priorities — consumer, emerging countries, notebooks, enterprise and small/medium business,” CEO Michael Dell said in a statement.

But Dell’s reinvigorated consumer and retail business raised concerns that its business mix could be moving toward lower-margin areas. The company also said it was seeing some caution from financial customers, but that demand remains strong.

Stocks posted modest gains during the day, as traders digested Wednesday’s huge gains and awaited a key speech Thursday night from Federal Reserve chairman Ben Bernanke. Sears fell 10% on disappointing results, yet had little effect on the broader market, which remains focused on hopes for more Federal Reserve rate cuts.

E*Trade fell 8% despite a $2.6 billion cash infusion and news that its chairman and CEO were both stepping down.

AMD lost 2% on company comments that pricing remains competitive.

TiVo soared 25% on better than expected sales.

VMware rose 3.6% on a Merrill Lynch upgrade, and Sigma Designs gained 10% on an RBC Capital upgrade.

The Nasdaq climbed 5 to 2668, the S&P added 1 to 1469, and the Dow rose 22 to 13,311. Volume fell to 3.5 billion shares on the NYSE, and 2.17 billion on the Nasdaq. Decliners led by an 18-15 margin on the NYSE, and 16-13 on the Nasdaq. Upside volume was 45% on the NYSE, and 50% on the Nasdaq. New highs-new lows were 50-142 on the NYSE, and 83-144 on the Nasdaq.

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