While Dell possibly could reduce its costs further by outsourcing, manufacturing is crucial to the company's business model. Rothdeutsch said he thinks Dell will meet Wall Street earnings estimates of 17 cents per share when it reports first-quarter results May 17. And Dell rivals, particularly Compaq Computer Corp., remain willing to slash prices. So Dell will have to continue cutting prices in order to gain sales in the coming quarter. While Dell has been willing to accept somewhat lower profits, there is a limit to what investors will allow.
Gross margin is a measure of basic profitability and costs of a company's core business.