Dell posts higher profit in quarter

Dell Inc. on Tuesday posted third-quarter profit that beat analysts’ estimates and said better customer service had helped stem defections to rival personal computer makers.

Net income was $677 million, or 30 cents a share, based on preliminary figures, Round Rock, Texas-based Dell said. Sales in the quarter ended Nov. 3 were $14.4 billion.

Dell, whose accounting is under investigation by regulators, didn’t provide comparable year-earlier figures after delaying results last week. To win back customers from Hewlett-Packard Co. and improve earnings, Dell cut the time U.S. customers waited on support hotlines to three minutes from nine minutes previously.

“The company’s making progress,” said Shaw Wu, an analyst at American Technology Research Inc. in San Francisco. “The profitability was the big surprise.”

Shares of Dell jumped $2.21, or 9%, to $27.03 in extended trading after the earnings report was released. The stock, down 17% this year, earlier rose 17 cents.

Dell reported net income of $606 million on sales of $13.9 billion in the same quarter a year earlier. The company has said it may need to restate previous results.

Chief Executive Kevin Rollins is spending $150 million to fix customer service problems that left U.S. buyers in what the company acknowledges was “Dell Hell.” Dell added call representatives in the U.S. and an online technical service to bolster support and cut down on customers’ telephone wait times.

Service representatives are transferring callers less and resolving more problems the first time a customer calls, the company said. Dell also is seeing the benefits of the more uniform pricing system announced in July after customers complained that its rebates and discounts were confusing.

The company said it would continue to invest in customer service, new products and expansion, which may lead to fluctuations in growth and profitability in the near term. Dell stopped giving earnings forecasts in May.

In a separate filing Tuesday, Dell said the U.S. attorney for the Southern District of New York had joined requests for information about the company’s financial reporting. Dell disclosed last week that the U.S. Securities and Exchange Commission had escalated its 15-month review to a formal investigation, which allows the agency to issue subpoenas.

Rollins, 54, and Chief Financial Officer Jim Schneider said in August that the SEC had been investigating Dell’s revenue recognition and other financial reporting for a year. In September, Dell delayed its second-quarter report to regulators and said the U.S. Justice Department had joined the probe.

The probes indicate possible errors related to so-called accruals and reserves, estimates of future obligations reported in previous financial statements, Dell said in September. At the time, the company said it hadn’t reached any conclusion as to how material the issues were.