????The company also managed to offset declines in its lower end laptops by pushing harder on its higher-end XPS line of notebooks. And the arrival of Microsoft's (MSFT) Windows 8 later this year will likely trigger a demand for new PCs and laptops, especially as companies upgrade to new the operating software.
????Dell has also fought off a decline in consumer sales by focusing on businesses and governments, which make up 80% of its sales. Dell has had success in selling to big companies. Sales to consumers fell to 19% of its total revenue last year from 23% two years ago. But sales to big companies rose to 30% of total revenue from 27% in the same period. Those big-company sales lead to higher margins: Operating profit in that segment were equal to 10% of its sales, while the operating profit from the consumer segment was 2.7%.
????As a result, Dell's total revenue grew by 17% over the past few years and its operating margin increased from 4.1% to 7.1% in the same period. The stock, however, still trades at only 7.7 times its earnings, about half of the 14.8 P/E for the S&P 500.
????For all that, Dell has some challenges ahead that are keeping investors from feeling too bullish. For one, Chinese companies are starting to get aggressive in the low-end servers that has been an area of growth for Dell. Intel's (INTC) Ivy Bridge chip, which powers higher-end laptops, is facing a delay.
????And the flooding in Thailand late last year disrupted the supply of hard disk drives, although one analyst, Jefferies & Co.'s Peter Misek, has said he thinks that all the talk about Thai floods is really "a smokescreen to mask underlying slower demand trends," such as the increasing popularity of iPads. The ability of Windows 8 to run on tablets could also pressure PC prices further, even as the components used to make PCs inch higher.
????Those concerns have weighed on Dell's stock in recent weeks, causing it to drop 10% from its February high. Dell's turnaround has taken nearly five years to start winning over investors. It has at least a few more months of hazards to navigate in the PC business still at its core. But if it can weather them, the company's second act could be a strong one.
