Hardware's Hopes Are Now Pinned on Dell

Updated from 7:05 a.m. EDT

Reeling from Hewlett-Packard's(HPQ) ugly execution issues, Wall Street looks to Dell(DELL) Thursday afternoon for assurance that computer hardware isn't falling into the hole already occupied by the rest of the tech world.

And although Dell(DELL) already broke the news in July that it would see better-than-expected earnings, don't rule out an upside surprise on revenue when the PC giant reports financial results after the bell.

The Round Rock, Texas-based computer maker, which has a habit of besting expectations, should benefit from PC-share gains in the second calendar quarter at the expense of H-P. Moreover, Dell's assertion in July that it is had seen "robust" sales of enterprise systems makes far more sense Thursday morning. Gains in foreign markets as well as strength in the U.S. small and medium business segment should also contribute to a solid performance.

On the bottom line, Dell should get a boost from stabilizing PC prices and favorable costs on computer memory and liquid crystal display monitors.

Wall Street analysts' estimates assume Dell will match its own upwardly revised guidance for a per-share profit of 31 cents, revised up on July 16 from its previous guidance of 29 cents. When the company hiked EPS guidance, it said 1 cent came from better operating profitability and 1 cent from a lower tax rate.

Yet even if Dell manages to pull off a positive surprise, the stock price likely would see limited benefit. With investors stricken over signs of a tech slowdown, the market has grown reluctant to award the usual back-pats for solid performance. (Indeed, shareowners sold stock after the company's last quarterly report in May because, while Dell delivered better-than-expected revenue, it didn't also beat earnings expectations).

And Dell shares already claim a big premium among tech stocks, reflecting the company's ability to outperform peers by taking share in the PC and server markets. Based on Wednesday's close of $33.57, Dell is up 1% this year, compared with an 11% loss for the Nasdaq Composite index, which closed Wednesday at 1782.

Dell also has held up better than rivals in a tech bear market that's grown bleaker over the past few months. Since mid-April, Dell shares have given up 5% of their value, compared with an 11% loss for the Nasdaq.