--H-P is expected to earn 87 cents a share on revenue of $30.8 billion
By Benjamin Pimentel
When Dell Inc. (DELL:$18.21,00$0.05,000.28%) and Hewlett-Packard Co. (HPQ:$29.35,00$-0.24,00-0.81%) report quarterly results this week, they're likely to portray a computer market that's battered but recovering as the two rivals battle for supremacy in higher-margin businesses.
Both companies have been hurt by the PC slump, which was worsened by the disk- drive shortage in the aftermath of floods that devastated Thailand.
Economic uncertainty, especially in Europe, hasn't helped, although Dell (DELL:$18.21,00$0.05,000.28%) and H-P both have had a shot at benefiting from a recovery in PCs along with growth trends in the corporate market which have lifted demand for hardware.
PCs will still have a tough time in the first half of the year, said Bob O'Donnell, an analyst with researcher IDC.
But "the general feeling is we will see some modest improvement in the second half."
Wall Street sentiment on Dell (DELL:$18.21,00$0.05,000.28%) has been particularly strong, as its shares have jumped more than 20% year-to-date as of Friday.
Round Rock, Texas-based Dell (DELL:$18.21,00$0.05,000.28%) is set to report after the market closes Tuesday. Wall Street has estimated the company earned a fiscal fourth-quarter profit of 52 cents a share, on revenue of $15.97 billion, according to FactSet Research's analyst survey.
In the year-earlier period, the company earned 53 cents a share, on revenue of $15.7 billion.
"We believe that Dell (DELL:$18.21,00$0.05,000.28%) could deliver upside to consensus earnings per share and revenues given the extra week of sales and share gains in segments such as PCs and servers versus H-P," Ben Reitzes, a Barclays Capital analyst, wrote in a research note.
However, Sterne Agee's Shaw Wu downgraded Dell (DELL:$18.21,00$0.05,000.28%) to underperform from neutral, writing, "We believe investor sentiment on Dell (DELL:$18.21,00$0.05,000.28%) shares has gotten too positive and arguably complacent."
Wu said he sees Dell (DELL:$18.21,00$0.05,000.28%) in "a tough competitive fundamental position," adding that "despite efforts to diversify, we estimate 70%-75% of its business is tied to PCs."
Dell (DELL:$18.21,00$0.05,000.28%) in the past couple of years has sought to emphasize higher-end segments of corporate IT, including networking, storage and services.
But it's a transformation likely to take time, analysts say. The same is true with rival H-P, which also is actively pushing into higher-end corporate IT.
Indeed, H-P already has a broad portfolio, from PCs to high-end servers to services, which is seen as a plus. Yet it's also been a burden for the company's efforts to reinvent itself, given its huge exposure in many markets.
At ISI Group, analyst Brian Marshall wrote in a note that H-P is "the only vendor which owns all of the required IP for architecting next-generation data centers."
But he also argued that the "challenge becomes integrating the roughly $35 billion of companies H-P acquired over the past several years."
The company is also going through a transition under Chief Executive Meg Whitman, who replaced Leo Apotheker, whose brief and ill-fated reign ended abruptly last September.
Not sure what koolaid you been drinking but since I worked there over 20 years I know you have been hitting it with the last comment. Leo was the biggest, stupidest looser in the history of the company!
For all we know maybe you are him and hoping it will go up so you can cash in on all the stock that was misappropriated to him/you!
If you are him.... I hope you loose all your money and end up homeless on the streets for what you did to HP and it's stockholders. Even that would be too good for you/him IMO.