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Dell Computer says quarterly profit falls

Dell Inc.,  Thursday said quarterly profit fell amid costs to cut jobs and repair faulty parts in business computers and it forecast fourth-quarter results slightly below some analyst targets.
/ Source: Reuters

Dell Inc., the world’s biggest personal computer maker, Thursday said quarterly profit fell amid costs to cut jobs and repair faulty parts in business computers and it forecast fourth-quarter results slightly below some analyst targets.

Investors may have been waiting for worse after a warning by Dell at the end of last month.

Net income for its fiscal third quarter ended Oct. 28 fell to $606 million, or 25 cents per share, from $846 million, or 33 cents per share, a year earlier, Dell said in a statement. Adjusted earnings were 39 cents per share, in line with a warning by the company on Oct. 31.

Revenue rose 11 percent to $13.9 billion from $12.5 billion.

The company forecast fourth-quarter revenue of $14.6 billion to $15.0 billion and earnings per share of 40 cents to 42 cents. Analysts, on average, had been expecting fourth-quarter revenue of $14.9 billion and earnings per share of 41 cents to 43 cents before one-time items, according to Reuters Estimates.

Commenting on the third-quarter performance, Chief Executive Kevin Rollins said, “Our operating performance was again exceptional by any comparable measure. ... However, we hold ourselves to higher standards.”

The company said it had about $442 million in one-time charges in the third quarter, including about $300 million for repairing faulty capacitors in business computers. It also paid for job cuts in Texas, the U.K. and Asia.

Round Rock, Texas-based Dell, whose direct-delivery model has helped it grow faster than the overall PC market for years, has had decelerating revenue growth for six straight quarters as it aggressively cut prices and faced tougher competition from rivals including Hewlett-Packard Co.  and Apple Computer Inc. .

Its shares have tumbled 31 percent this year on concern over revenue growth. The stock has lagged behind the Standard & Poor’s Computer Hardware index by 27 percent. Dell shares trade at 16 times 2006 estimated earnings, about the same as Hewlett-Packard and below Apple’s 29.