Dell's total revenue for the third quarter was $12.9 billion, a one percent improvement over the second quarter but a 15 percent decline from the year-ago period. Earnings per share were 17 cents. Cash flow from operations totaled $801 million. Operating expenses were 12.8 percent of revenue, or $1.7 billion, 10 percent lower than last year's third quarter.

"We are seeing improvement in overall underlying IT demand that is continuing into the fourth quarter," said Michael Dell, chairman and CEO. "The same is true with momentum in Dell's business, specifically in our large-enterprise and SMB segments. The launch of Windows 7 is being very well received by SMBs and consumers, and we'll see the benefits of that more fully in our fiscal Q4."

An Active Third Quarter

Dell had an active third quarter. The company completed the acquisition of Perot Systems in early November. Dell hopes the acquisition will give the company an advantage in delivering more practical solutions to help customers reduce IT costs. Dell is in the process of integrating Perot Systems into its business.

"Consistently generating strong cash from operations allows us to expand our own capabilities and acquire new ones," said Dell CFO Brian Gladden. "Those investments will mostly be in higher-margin enterprise solutions, like our purchase of Perot Systems. Adding Perot best positions us to provide streamlined solutions that help customers get the most from their IT budgets."

Dell had a strong quarter with its enterprise-systems business. Server and storage revenue were up a combined five percent with particular strength in year-over-year EqualLogic sales. Dell believes its strategy to design and deliver practical, standards-based solutions for the data center and the cloud is resonating with customers looking to reduce complexity, improve efficiency , and lower costs.

Dell also had some wins internationally. Its combined sales in China, India, Brazil and Russia were up 18 percent sequentially and five percent over last year. In China, Dell's second-largest country in terms of revenue, sales increased 20 percent sequentially and eight percent year over year.

Expecting a Stronger 2010

Dell expects seasonal demand improvement in its consumer business in the fourth quarter. The company also noted improvements in underlying sequential trends in several areas, including a significant portion of its commercial business.

Dell said recent technology introductions, indications of improving economic activity, and the prospect of a lift in IT spending position the company well, particularly as commercial customers upgrade technologies, beginning in 2010.

"The IT market for desktop solutions has been particularly brutal over the past two years, given the combination of tight money and the poor showing that Microsoft Vista made," said Charles King, principal analyst at Pund-IT. "Was this a bad quarter? Absolutely. I don't think it could be described any other way. But at the same time, I'd say the very positive reaction to Windows 7 so far suggests that next year should be a better year for all the PC and notebook makers, and I believe that Dell will benefit as much as HP or anybody will."