Dell Earnings Preview: Bigger Slice of the PC Pie?

Computer maker Dell is scheduled to report its fiscal second-quarter results after the market closes Thursday. The following is a summary of key developments and analyst opinion about the period.

Elise Amendola / AP

Overview

Despite economic pressures crimping consumer spending, Dell, the world's second-largest maker of PCs, again out-shipped No. 1 Hewlett-Packard in the U.S. in the quarter, according to data from IDC, a technology research group based in Framingham, Mass. However, lower prices may have contributed to the stronger-than-expected shipments domestically, analysts said.

Dell continued its expansion into retail stores in the quarter, which ended Aug. 1, announcing it would sell PCs in a major Chinese electronic retail chain called Suning. PC shipments are growing faster in emerging markets like China and India than in the U.S. and Western Europe.

By The Numbers

Analysts surveyed by Thomson Reuters expect Dell to report a profit of 36 cents per share on $15.94 billion in sales. Dell did not issue quarterly guidance when it reported first-quarter results.

Analyst Take

Doug Reid, an analyst at Thomas Weisel, wrote in a research note that the company's retail push helped it capture a bigger slice of PC sales in the quarter, but that the company needs to work on similar deals with information technology distributors to keep growing.

American Technology Research analyst Shaw Wu wrote in a note to investors that "PC-related companies appear to be performing much better than consensus thinking versus other areas of technology including cell phones and panels/TVs." The analyst currently has a "Neutral" rating on the stock.

Wu's research mirrored IDC's findings, and he wrote that he expects Dell to post a larger-than-expected increase in units shipped. However, he added, his research shows "a lower-end mix from the build data and fairly heavy promotional activity, so we are not sure if it will translate into revenue and profits."

FBR Research analyst Clay Sumner wrote in a research note that components such as LCD screens were costing Dell less than expected in the quarter, which may offset the effect of lower PC price tags on the company's margins.

(An outlook on Dell ahead of earnings with the Fast Money team. Watch the accompanying video.)

In terms of sales, Sumner, who rates Dell "Outperform," wrote that laptop suppliers in Taiwan indicated shipments rose faster in July than expected. Those suppliers have boosted their forecast for the third quarter, he noted.

What's Ahead

Dell will continue to move to curb costs while competing with HP. Founder Michael Dell, who returned to the Round Rock, Texas, company as chief executive in 2007, has vowed to cut even more than the 8,800 jobs he targeted last year, and slash costs by $3 billion over several years.

Stock Performance

Shares of Dell rose by about 26 percent in the quarter. On Tuesday, the stock rose to over $25 in afternoon trading.

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