Dell (NASDAQ: DELL), whose tech colleagues include Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Intel (NASDAQ: INTC) and Hewlett-Packard (NYSE: HPQ), had a pretty decent third quarter. The bottom line came in at $0.37 per diluted share. That represented a growth rate of 9%, and it handily beat analyst expectations of $0.31 per share according to Thomson Reuters. I give Dell credit for the significant beat.
However, it should be noted that the bottom line was driven in part by share repurchases. There's nothing necessarily wrong with that, but it does put the big earnings beat in perspective. Indeed, on a dollar basis, profits decreased about 6%. Still, operating income rose 22% on a year-over-year basis.
But then there's the statement of cash flows. Cash was used for operations in the third quarter, a reported $86 million. Last year at this time, Dell generated $998 million from operating activities. That's something to at least think about. In fact, the press release said that slowing demand helped to worsen the cash conversion cycle. Now, I won't crucify Dell on this one cash-flow statement, because the company should still deliver a lot of the green stuff on an annual basis. But even the nine-month statement shows a decline in cash from operations. Again, it's something an investor must consider, and it puts that earnings beat in perspective.
Would I buy Dell? Is it a value play at these levels? Probably not. Dell's stock saw a 5% pop in the after-hours session on Thursday. I don't care. Doesn't make me want to either trade it or invest in it; not in this gruesome bear market. The press release made it amply clear that all management can do at this point is contain costs. The company scored on the gross-margin front, but I still think that now would not be the right time in this dreadful economic cycle to consider picking up shares of Dell.
Disclosure: I don't own any company mentioned; positions can change at any time.
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