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Dell's gross margin was 22.9 percent in the quarter, above the average forecast of 20.35 percent, driven by the strength in its enterprise business.

Revenue in the fiscal first quarter ended April 29 rose to $15 billion from $14.87 billion a year ago, but fell short of the average analyst estimate of $15.4 billion according to Thomson Reuters I/B/E/S.

Shares of Round Rock, Texas-based Dell jumped 5 percent in extended trading after closing down 0.63 percent at $15.90. The shares were initial halted in after-hours trading.

The better-than-expected results are in sharp contrast to larger rival Hewlett-Packard Co's, which disappointed investors by cutting its profit outlook, sending its shares down over 7 percent.

Dell still generates most of its revenue from selling personal computers but is moving to diversify its revenue base, given the weakened demand in the consumer PC market.

Dell wants to become a larger player in the data center equipment market and gain a toehold in the fast-growing mobile space with tablets and smartphones, but faces stiff competition in those markets from the likes of International Business Machines Corp and HP.

Dell reported a net profit of $945 million, or 49 cents a share, up from $341 million, or 17 cents a share, a year ago.

Excluding items, Dell earned 55 cents a share, handily beating the average estimate of 44 cents a share according to Thomson Reuters I/B/E/S.

(Reporting by Poornima Gupta; Editing by Richard Chang)

Corporate results from Home Depot Inc added further evidence of a decline in housing after the No. 1 home improvement chain noted poor weather hurt the spring selling season and sapped its sales.

Groundbreaking for new housing dropped 10.6 percent to an annual rate of 523,000 units, the Commerce Department said on Tuesday, as a glut of homes on the market discouraged new projects. March's starts were revised up to a 585,000-unit pace from the previously reported rate of 549,000 units.

The report pointed to prolonged weakness for the sector. Economists had forecast housing starts rising to a 568,000-unit rate. Compared to April last year, residential construction was down 23.9 percent, the largest decline since October 2009.

Starts in the South slumped to a two-year low.

"We're still struggling to find the bottom here for the housing market. It does not bode well for construction in the near term, and there's a good deal of overhang in terms of inventory," said Michael Woolfolk a senior currency strategist at BNY Mellon in New York.

A separate report showed the Japanese earthquake had hit U.S. manufacturing output, which fell 0.4 percent in April after 9 consecutive monthly increases, the Federal Reserve said. Overall industrial production was flat, buoyed by gains in mining and utilities.

Excluding cars and parts, manufacturing output rose 0.2 percent.

Capacity utilization, a measure of how close to flat out factories are running, fell unexpectedly in April, suggesting scant inflationary pressures in the world's largest economy.

Wal-Mart Stores Inc's, the world's largest retailer, said its U.S. business continues to struggle even as international sales held strong.

U.S. stocks fell on concerns about the economic recovery, while Treasury debt prices rose and the dollar firmed against a basket of currencies.

TOO MANY HOUSES ON THE MARKET

Residential construction is being crowded out by an oversupply of used homes on the market, in particular, foreclosed properties, which sell well below their value.

In March, the spread between the prices of new and previously owned houses was about $54,200.

Home builders' sentiment was flat in May, the National Association of Home Builders said on Monday.

Though builders expected a modest improvement in sales during spring, they anticipated market conditions to weaken in the next six months.

Residential construction accounts for about 2.2 percent of gross domestic product. Investment in home building contracted in the first quarter after a modest increase in the last three months of 2010.

Groundbreaking last month was depressed by a 24.1 percent tumble in the volatile multi-family homes sector, where starts for buildings with five or more units dropped 28.3 percent. Single-family home construction fell 5.1 percent.

New building permits dropped 4.0 percent to a 551,000-unit pace last month. March's permits were revised down to a 574,000-unit pace and economists had expected overall building permits in April to remain unchanged at the previously reported 585,000-unit pace.

Permits were held down last month by an 8.8 percent drop in the multi-family segment. Permits to build single-family homes slipped 1.8 percent.

New home completions rose 4.1 percent to 554,000 units in April.

(Additional reporting by Mark Felsenthal; Editing by Andrea Ricci)

By 4:38 a.m. EDT, futures for the S&P 500, Dow Jones futures and Nasdaq futures were up 0.1 to 0.3 percent.

The Nasdaq .IXIC fell 1.6 percent on Monday as investors sold recent gainers on the back of growing unease with parts of U.S. economic weakness.

The Dow Jones industrial average .DJI and the S&P 500 .SPX were off 0.4 and 0.6 percent, with a disappointing reading of manufacturing in New York state adding to the uncertain outlook for the economy.

Housing starts data is scheduled for release at 8:30 a.m. EDT, with economists predicting a rise to around 568,000 in April compared to 549,000 a month earlier.

Other data set for release includes April's industrial output figures at 9:15 a.m. EDT.

Earnings results will also be in focus, with Wal-Mart (WMT.N) expected to post a rise in profit to 95 cents from 87 cents a share this time last year, with the retailer's top priority firmly on turning around nearly two years of declining sales at U.S. stores open at least a year.

Home Depot (HD.N) is seen posting a rise in earnings per share to 49 cents from 45 cents a year ago, although investors will be wary after rival Lowe (LOW.N) reported weaker-than-expected quarterly results a day earlier.

Dell (DELL.O) also reports earning, along with rival Hewlett Packard (HPQ.N), which is set to bring forward its earnings release after reports its CEO had warned of a tough July quarter.

In company news, New York Attorney General Eric Schneiderman is investigating big banks like Bank of America Corp (BAC.N), Morgan Stanley (MS.N) and Goldman Sachs (GS.N) related to packaging of toxic mortgage loans into securities, the Wall Street Journal reported, citing sources.

BP's (BP.N) (BP.L) move to gain a foothold in Russia's offshore Arctic oilfields through a deal with state-controlled Rosneft (ROSN.MM) has collapsed after it failed to resolve a dispute with partners in TNK-BP (TNBP.MM).

Mining equipment maker Joy Global (JOYG.O) is to buy Rowan Cos Inc's (RDC.N) drilling and mining gear unit for $1.1 billion in cash, as it looks to offset stiff competition in its main market by entering the lucrative oil and gas drilling business.

On the economic front, The United States reached the legal limits of its borrowing authority on Monday as a top Republican increased his party's demand for deep spending cuts as part of any increase.

In a sign of caution ahead for Japanese growth, the Bank of Japan's Governor said the country's economy was in a very severe state due to damage from the March earthquake, signaling that the central bank was sticking to its loose monetary policy stance.

European shares on the FTSEurofirst 300 .FTEU3 were slightly lower in early trade, on track to fall for the fourth straight session.

(Reporting by Harpreet Bhal; Editing by Hans Peters)