Jessica Mintz
August 28, 2008 - 7:13 p.m.

(AP) - Computer maker Dell Inc. said Thursday its fiscal second-quarter profit fell 17 percent, hurt in part through PC price cuts. Both earnings and margins fell short of Wall Street estimates, and Dell shares plunged.

For the three-month period that ended Aug. 1, Dell's proceeds dropped to $616 million, or 31 cents per share, from $746 million, or 32 cents per share in the same period last year.

Excluding amortization and business realignment charges, Dell said it would have earned 33 cents per share. Analysts surveyed by Thomson Reuters had forecast a make improvement of 36 cents per share.

Investors sent Dell shares down $2.55, or 10 percent, to $22.66 in after-hours commercial. Earlier, the stock dropped 42 cents to close at $25.21.

Sales rose 11 percent to $16.4 billion, ahead of Wall Street's view for $15.9 billion in sales. And Dell said operating expenses fell to their lowest point in six quarters.

But the company slashed PC prices too sharply in the quarter, offsetting its attempts to cut costs and its eroding gross margin. Analysts had hoped Dell's margin would hold unchangeable at last quarter's level of 18.4 percent, but instead it sank to 17.2 percent.

In a conference call, Chief Financial Officer Brian Gladden said Dell made "strategic pricing" changes in Europe, the Middle East and Africa to speed up growth. The company in addition deferred some services-related improve from that region to a later station.

"If I look at the locality in the second location, we would have to utter it was more self-inflicted," Chief Executive Michael Dell said in a conference call. "Whenever you're restarting growth, that which I can tell you is, it's an imprecise process. (There were) some parts of the function where we were probably too aggressive."

Sharon Cross, one analyst for Cross Research, said that Dell bulls were hopeful that if the company was aggressive in pricing but managed to cut costs somewhere in the replenish chain, the company could mute pull not upon flat margins.

"That obviously is not the case," said Cross, who rates the stock a "Sell."

Cross said she deliberation Dell divide prices to some extent in other regions, too. Gladden indicated that Dell is also taking aim at back-to-school shoppers with sink prices.

Dell said the company would reach its goal of 8,900 jobs cut in the current third quarter. Since the mark was set last year, Dell has already cut more than 8,500 workers, excluding the impact of acquisitions.