Dell posts gains as laptop, international sales surge

Dell dell reported surprisingly strong quarterly earnings Thursday, a sign that the computer giant is finally turning itself around.

The No. 2 PC maker reported revenue of $16.1 billion in the quarter ended May 2, up 9% from $14.7 billion a year ago. Wall Street analysts on average had expected $15.7 billion, according to Thomson Reuters.

The news, released after markets closed, sent Dell's shares up 9% to $23.85 in after-hours trading. Before that, Dell shares had fallen 11% this year.

"Patient investors (in Dell) are beginning to get rewarded," says analyst Bill Kreher at investment firm Edward Jones.

Dell Chairman Don Carty says his company's strong numbers weren't due to an overall economic uptick. "We are seeing conservatism in (technology) spending in the U.S., and we expect that to continue through the summer," he says.

Instead, "we're starting to see results" from Dell's year-long turnaround plan, he says.

Dell — which once dominated the PC industry but now lags behind Hewlett-Packard — reported sales increases in every category except for desktop PCs. Net income of $784 million, or 38 cents a share, rose from $756 million, or 34 cents a share, a year ago.

Many of the increases came in key areas. For the first time, Dell's international revenue exceeded its U.S. revenue during the quarter. Dell used to rely on the U.S. business market for much of its income, which made it vulnerable to fluctuations in the U.S. economy.

Sales into four fast-growing countries, Brazil, Russia, India and China, accounted for almost 9% of revenue.

Laptop sales, another bright spot, increased 43% over the year before. Dell had been slow to recognize the growing importance of laptops, Kreher says. Now, Dell, which used to sell mainly online and via catalog, is selling computers in retailers such as Best Buy. That makes laptop sales easier, because shoppers can feel their size and weight before buying.

Dell's turnaround began in January 2007, when Michael Dell returned as CEO after Kevin Rollins resigned. The company had run into hard times, including falling market share and a Securities and Exchange Commission investigation into its accounting. (Dell restated some earnings last year.)

The overhaul is ongoing. As previously announced, Dell cut 3,700 jobs in the quarter.

"We're seeing the results of Michael (Dell) returning to the helm," says tech analyst John Enck at researcher Gartner. "He's fine-tuning all the dials." But Enck says that Dell still has much work to do. A full turnaround "will take at least 24 months," he says.