Dell Didn't Deserve This Drubbing

Mr. Market didn't appreciate Dell's (NAS: DELL) fourth quarter at all. You should take advantage of that mistake.

Shares fell more than 6% in early trading when the computer builder missed analysts' earnings targets. Total revenue of $16 billion nudged past Street estimates, but $0.51 in non-GAAP earnings per share fell just a sliver short.

Gross margins were held back by a surprisingly low-end product mix in spite of Dell's stated desire to go upscale. But the quarter wasn't entirely devoid of good news. Total sales rose just 2% year over year, but large enterprise revenue jumped 5% and business was brisk in the BRIC bloc with a 10% sales leap. And while consumer sales in the U.S. sank, the rest of the world actually wants to buy Dell's consumer systems now. In particular, the top-shelf line of XPS notebooks more than doubled its sales in fiscal 2012.

So the overall strategy seems to be working as Dell moves further into high-margin sales. Looking ahead, Dell expects earnings to rise in 2013 while analysts predict modest shrinkage. That's the kind of rosy outlook that tends to trump a slight earnings miss, but not this time.

Keep in mind that last night's drop only erased a couple of weeks' worth of Dell's steady share-price gains in 2012. The company looks fundamentally healthy and headed in the right direction; drops like these give us sideliners a terrific opportunity to get into Dell. However, if Dell doesn't seem like your flavor, Foolish analysts have found an even more promising stock for your portfolio. Learn all about The Motley Fool's Top Stock for 2012 in a special report -- free for a limited time.

At the time this article was published Fool contributorAnders Bylundholds no position in any of the companies mentioned.Motley Fool newsletter serviceshave recommended writing covered calls in Dell. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+. We have adisclosure policy.

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