Dell Computer may start to ease off its PC price war, executives said on Thursday, while reporting third-quarter earnings slightly ahead of expectations. The Round Rock, Texas-based company reported net income of $429m (£300m), or 16 cents a share, compared with net income of $674m, or 25 cents a share, in the same period a year ago. Analysts polled by First Call had on average expected the company to report earnings of 15 cents a share. Third-quarter sales were $7.5bn, within the range the company had targeted in August, when it told analysts to expect revenue that was flat to down 5 percent from the second quarter's $7.6bn. Dell executives said the PC maker will hold the line on prices, as it continues to pass on the results of falling component costs to its customers in the fourth quarter. "From the standpoint of a pricing environment, we have not seen things particularly change (in the third quarter) and do not plan to change things from" the third quarter to the fourth, Dell President Kevin Rollins said during a conference call after the announcement. "We don't need to get more aggressive (on price), but we don't anticipate backing off at all" on any product. The company said it sees fourth-quarter earnings per share flat at 16 cents, although total revenue is expected to increase slightly, said chief financial officer Jim Schneider, with unit shipments rising about 5 percent from the third quarter. However, when it comes to revenue gains, "it all depends really on what happens with the average selling price", he said. Dell's third-quarter average selling price was about $1,800, down about $50 from the second quarter. As component prices fall and Dell passes those saving along to customers, its average selling price will decline again in the fourth quarter. "Should we achieve that unit increase (and see a similar pricing drop), we'd expect to have slight--could be in the 1 or 2 percent range--revenue increase," Schneider said. Dell executives said that component prices might well stabilise in the fourth quarter, after falling precipitously throughout the year. "We've had a pretty aggressive run (of price declines) over the past few quarters," Rollins said. As a result, "We'll probably see some softening in the overall component price decline." But Dell executives said that while there are indications that the PC market might be looking up, it's too soon to call for a resurgence. "We think there's at least the potential for a late spring-early summer uptick," Rollins said, "but that's our best call right now. We don't have a lot of data to support that" yet. Despite a continued PC slump in the third quarter, economic uncertainty, and the 11 September attacks, Dell managed to increase sales of its computing products and services across the board. "While we recognise the near-term challenges in the PC industry, we think that Dell is positioned to leverage its efficient direct model, which enables it to be profitable... while its competitors are unprofitable in the same business segments," Bear, Stearns analyst Andrew Neff wrote in a report issued on Wednesday. Chief executive Michael Dell said pent-up demand should push sales. He said the company estimates that 164 million PCs will be more than three years old at the end of 2001. "We would expect that in the spring and in the summer there's going to be a lot of upgrade activity going on at corporations," Dell said. While the PC market continued to slump, with sales sliding 12 percent from the third quarter of 2000, Dell gained nearly 11 points of market share, according to research firm Gartner. Dell's share was 13.8 percent of the worldwide PC market and 25 percent of the US market. Dell's nearest rival, Compaq Computer, saw sales slip 31 percent. It ended up with a 10.4 percent share of the market. The gains come from a number of areas, including Dell's price war with competitors as well as uncertainties surrounding the proposed merger of Hewlett-Packard and Compaq. Dell claims to have gained several customers from both companies in recent months as a result of the proposed marriage. "Customers in that environment are a little nervous," Schneider said. "As a result, those customers are either opting to go with Dell (as their primary equipment provider)...or those with HP or Compaq as a primary supplier have chosen to go with Dell as a second supplier. We have had accounts who have very specifically told us that's why they were coming." Dell's Joe Marengi, for example, recently told CNET News.com, that the chief information officer of a major bank in North America approached the company about switching over from Compaq to Dell hardware. When Marengi, senior vice president and general manager for Dell Americas, asked the CIO if the HP-Compaq merger scared him, the CIO replied "That's why I'm here." But not everything is rosy for the Dell. Despite its hopes for an uptick in the market, analysts suggest it will be some time before the PC market returns to its former glory, probably not until 2003. That means it will also be some time before Dell can take full advantage of its recent account wins. Some critics also suggest Dell's market share gains will slow with time. The company faces supply issues with the fastest Pentium 4 chips. Dell recently stopped taking orders for Dimension 8200 desktop PCs and other systems that include the 2GHz Intel processor, and this past weekend it pulled the chip from its Web site "configurator", through which consumers can pick and choose the features they want for a given system. While a minor issue when measured against Dell's overall PC sales, it represents a missed opportunity for the company and shows its reliance on Intel for processors and other technologies, analysts said Thursday. However, founder Michael Dell is unabashedly bullish about the PC market as a whole. "I believe the consumer selling season in the fourth quarter is going to be pretty good," he said recently. "The fourth quarter is always a good quarter for consumers. I think it will be a good quarter this year as well." Staff writer Michael Kanellos and Reuters contributed to this report. See the Hardware News Section for the latest update on everything from MP3 players and PDAs to supercomputing. 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