San Francisco - Computer maker Dell posted lower quarterly profits Thursday, but said sales increased more than expected as the company tries to overtake Hewlett Packard as the world's biggest computer company.

The Round Rock, Texas-based company reported net income of 616 million dollars, or 31 cents per share, down 17 per cent from a profit of 746 million dollars, or 33 cents per share, that the company reported a year ago.

Sales in the quarter rose 11 per cent to 16.43 billion dollars from 14.77 billion dollars in the same period last year.

Michael Dell, chairman and chief executive, highlighted the company's strong quarterly sales. "We are positioning Dell to win in a new era of global IT spending," he said in a statement.

But investors took a dimmer view and sent shares of the PC maker down about 10 per cent in after-hours trading.

While investors were concerned about lower margins, Dell's chief financial officer Brian Gladden said in a statement that "strategic actions to accelerate growth in certain areas of our business affected gross margins this quarter."

He added that Dell will continue to incur higher costs in the near-term as the company tries to move toward a more profitable long-term business model.