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Michael Dell Steps Up to the Mic

Alexei Oreskovic

SAN FRANCISCO -- Dell(DELL) investors will be all ears Thursday.

The PC maker's quarterly earnings report will mark the end of its silence, as Dell hosts its first conference call in more than a year.

More importantly, investors will have the first real chance to hear founder Michael Dell outline his comeback plan.

Dell returned to the CEO post in January, but because of an internal accounting investigation, he has yet to do the customary Q&A with financial analysts.

With the internal review now completed (Dell restated several years of reports that lowered revenue by $359 million. Investigations by the Securities and Exchange Commission and the Department of Justice continue), Dell executives will be able to provide a much-needed update on their overall strategy.

The stock's mixed traits reflect faith in Michael Dell's touch as well as uncertainty regarding the company's prospects among a formidable field of rivals.

Trading at 16.5 times forward earnings, Dell commands a higher multiple than the seemingly infallible Hewlett-Packard(HPQ), which has a price-to-earnings ratio of 15.

On the other hand, Dell shares have lost twice as much ground as the Nasdaq Composite since July. And short interest in Dell has risen 42% since mid-August, according to American Technology Research analyst Shaw Wu.

Dell shares finished Wednesday's regular session up 3.9%, or $1.05, to $27.69, in keeping with the day's broad stock market rally.

Wu expects Dell to beat the average analyst expectation of $15.3 billion in revenue -- a 6% year-over-year increase -- and 35 cents in EPS.

The latest report from industry research firm Gartner suggests that Dell's server sales are in good shape. And healthy demand for PCs has benefited virtually every company that's directly involved in the computing business, such as Intel(INTC), H-P and Seagate(STX) -- a good omen for Dell.

Still, much of the recent PC growth is coming from consumer notebooks and emerging markets overseas, two of Dell's weak spots.

And despite the return of Michael Dell, the company appears to be struggling to get its consumer PC business back on track: In its second-quarter report, Dell said its U.S. consumer revenue plunged 27% year over year, with notebook unit shipments down 38%.

"The demand for our products deteriorated due to price competition and decreased product appeal," Dell acknowledged in the filing.

Dell has made various moves to rejuvenate the consumer PC business, busily striking distribution deals with Wal-Mart(WMT) and Staples(SPLS), and introducing notebook PCs with new features and snazzy colors.

The progress, or lack thereof, of these consumer initiatives will be among the key questions for investors Thursday.

Dell's senior management should be able to provide some details about the company's new-found taste for mergers and acquisitions -- Dell has acquired five companies since July, including a $1.4 billion cash deal for EqualLogic.

With $11.2 billion in cash (excluding the effect of the EqualLogic deal), Dell has plenty of capital to shop around with, though it's unclear if Dell sees acquisition opportunities beyond the information technology management field.

One nugget of information that analysts don't expect to get from Dell is financial guidance for the current quarter.

Communication with the Street, like Dell's efforts to reposition the company, may occur one step at a time.