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Dell Inc., the world’s second-biggest maker of personal computers, topped profit and revenue estimates yesterday after slashing costs by contracting out production. Dell’s second-quarter profit was 28 cents a share, excluding some expenses. Analysts had predicted 22 cents on average.

Overall, the two key near-term bear arguments for the stock—gross margins and cash flow were counteredby the July quarter results.

We continue to believe the PC market will enjoy a solid corporate refresh cycle in 2010, largely due to the rising maintenance costs of legacy PCs. Dell’s heavy corporate exposure positions it well in this respect.

We are raising our fiscal 2010, increasing our October quarter revenue and EPS estimates to $12.99 billion from $12.55 billion. We’re raising our 12-month target price to $19 from $16. We reiterate our buy rating.