UPDATE: Dell 1Q Net Jumps 52% On Higher Sales; Shares Slide

(Updates with executive comments.)

 
   DOW JONES NEWSWIRES 
 

Dell Inc.'s (DELL) fiscal first-quarter profit improved 52% as shipments jumped and revenue grew in each product segment, although margins again fell.

Shares of the computer maker dropped 2.9% to $13.90 in after-hours trade because its gross margins fell short of Wall Street expectations. Sales and adjusted earnings, however, beat estimates.

The company is shifting its business to go after the more profitable corporate and small-business markets.

For the quarter ended April 30, Dell posted a profit of $441 million, or 22 cents a share, up from $290 million, or 15 cents a share, a year earlier. Excluding severance costs and other items, earnings rose to 30 cents from 25 cents. Revenue climbed 21% to $14.87 billion as shipments grew 20%.

Analysts surveyed by Thomson Reuters projected a profit of 27 cents on revenue of $14.27 billion.

Gross margin slid to 16.9% from 17.6%.

Margins were affected by component shortages, which led to more-expensive parts, as well as a larger mix of less profitable products, said Chief Financial Officer Brian Gladden. Also hurting margins was pressure seen in U.S. and U.K. government spending, he added.

Revenue for desktop personal computers increased 13%, while the mobility segment, mainly notebook computers but also other mobile devices, saw an 18% jump. By customer segment, Dell reported an increase for all four segments, led by a 25% increase in the large-enterprise segment and a 22% jump by the public segment.

Last month, Gartner Inc. (GT) said worldwide PC shipments jumped a stronger-than-expected 27% in the first quarter, although both Dell and rival Hewlett-Packard Co. (HPQ) lost market share. On Tuesday, H-P reported its fiscal second-quarter profit grew 28% on higher worldwide sales and profit growth in the company's core PC business.

Average selling prices for notebooks and desktops have been stable, and there is growth coming back on the commercial side, Chief Executive Michael Dell said.

The company is more optimistic about the business side versus the consumer PC business. Dell said companies are at the front end of a new upgrade cycle, noting that only a few businesses have upgraded to Microsoft Corp.'s (MSFT) latest operating system, Windows 7.

Dell Executive Brad Anderson said the company was on target with its integration of Perot Services.

Gladden said that he expects global currencies to remain volatile.

On the emerging tablet business, Dell said he doesn't see tablets replacing the more traditional computer business. The devices are better suited for consuming media than creating it, and he said he believes the company's work with Google Inc.'s (GOOG) mobile operating system Android is a more attractive option than acquiring a company. H-P has agreed to buy Palm Inc. (PALM).

-By John Kell, Dow Jones Newswires; 212-416-2480; [e-mail]

(Roger Cheng contributed to this report.)