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Dell share price drops in reaction to narrow profit margins

Dell has reported revenues of $14.9bn for the quarter ending 29 January, up 11% from a year ago, and operating income at $510m, up 12% on the same period a year ago.

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Dell has reported revenues of $14.9bn for the quarter ending 29 January, up 11% from a year ago, and operating...

income at $510m, up 12% on the same period a year ago.

But despite revenues boosted by Dell's acquisition of the profitable services company Perot Systems, operating income was just 3.4% of revenue, virtually unchanged from the year before.

Dell shares dropped 3% to $13.97 in after hours trading as investors expressed their disappointment at profit margins remaining the same at they were at the height of the US recession, analysts said.

The strongest performing divisions in terms of revenue were consumer, up 11%, and small and medium business, up 10%, both ahead of large enterprise, which was up only 8%.

Public sector was up 16% overall, but excluding revenues from Perot Systems, this was only 3% up on the same quarter the previous year.

Dell achieved solid revenue growth in every part of the business, said Brian Gladden, chief financial officer

"Our commercial units are well poised for profitable growth as demand continues to return because we're meeting customer requirements for higher-value, higher-margin servers, storage systems and services," he said.

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