Can Dell Follow H-P’s Lead? (HPQ, INTC, DELL, MSFT, IBM)

In what might have been an entirely predictable earnings report last night, Hewlett-Packard (HPQ) reported that fiscal 2010 first-quarter revenue increased by 8% to $31.2 billion and diluted EPS of $0.96, up from EPS of $0.75 in the same period a year ago. Excluding items, HP’s EPS reached $1.10, beating average estimates of $1.06. Revenue also beat a forecast of $30 billion.

When Intel Corp. (INTC) reported its fourth-quarter earnings a month ago, expectations were set for both H-P and Dell Inc. (DELL) to follow. H-P has done its part, and Dell is reporting its earnings after the market closes today. That is not likely to be as upbeat.

Dell has lost market share while H-P has gained. In fact, according to IDC, Dell is now third in share, behind H-P and Acer.

Fourth-quarter 2009 PC sales were up 45% compared with the same period in 2008, and for the full year, 2009 saw demand for PCs grow by 24% year-over-year.

H-P’s PC division posted a year-over-year revenue gain of 20% to $10.6 billion, with a good balance between notebook gains (up 25%) and desktop gains (up 16%). The introduction of Microsoft’s (MSFT) Windows 7 operating system, which has shaken loose some consumer spending for new computer systems.

The enterprise market has yet to fall in line behind Windows 7, but that is expected to happen in the second half of this year. That’s especially good news for H-P because it posted an 11% gain in server sales in the quarter.

Dell’s commercial sales account for about 80% of the company’s revenue, compared with about 16% of H-P’s revenue. Taken together with the slow adoption of Windows 7 in the enterprise market, that would indicate that the December quarter will not be terribly strong for Dell.

In the services area, Dell’s service business is nowhere, compared with H-P’s. H-P lost a bit on services last quarter, but that was mainly a result of lowering its prices in order to gain share. H-P is taking on IBM Corp. (IBM) in the services business, and not Dell. That actually works to Dell’s benefit, but it’s not enough to change the calculus.

H-P is gaining PC market share and Dell is losing share. H-P is increasing its revenues in virtually every division and Dell is not.

Dell is expected to report EPS of $0.27 on revenue of $13.85 billion. Both would be an increase from the year ago quarter. Even if Dell hits those numbers, the impact will certainly be muted.

Tell us what you think here.

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