Challenges Mount for PC Maker Dell

SAN FRANCISCO (Reuters) – Dell Inc, the world’s No. 2 PC maker, posted a better-than-expected quarterly profit on Thursday as cost cuts offset lower revenue, sending its shares up about 6 percent.

Dell had been facing subdued expectations for the October quarter. The company warned in September, just weeks after reporting second-quarter results, that it was seeing "further softening" in global demand.

But Dell waged an aggressive campaign to control costs, cutting operating expenses by 11 percent from last year. Gross margin rose to 18.8 percent from 17.2 percent.

"We’re clearly choosing profit over growth, but we also believe the changes we’re making to our cost structure will allow us to achieve both over time," Chief Executive Michael Dell said on a conference call with analysts.

The unexpectedly strong results cheered Wall Street, although some worried about a revenue drop, and the after-hours share rise was close to the size of the drop during regular trade.

"It was certainly a surprise and what this shows is that cost-cutting initiatives are beginning to take effect," said Bill Kreher, a technology analyst at Edward Jones. "The slowdown in PC demand affected laptop sales and thus revenue."