Little Leeway for Dell

One clue that Dell executives may be contemplating more sweeping organizational and strategic changes was the abrupt decision earlier this year to postpone the company's annual analyst day from April until September.

In news reports at the time, Dell officials downplayed the delay, ascribing it more to scheduling than other issues. Given the company's recent struggles, however, it's not inconceivable that Dell's management could be crafting a broad turnaround plan to be unveiled later this year.

So while analysts no doubt will have plenty of pointed questions for Dell executives during Thursday's conference call, detailed answers may have to wait until September.

Even Dell bulls acknowledge that change is in the cards.

American Technology Research analyst Shaw Wu, who rates Dell buy, says the company needs to reset its cost structure. This, he says, will allow the company to once again be the PC industry's low-cost leader.

Dell's past success owed much to its Wal-Mart-like strategy of driving down prices across its network of suppliers, says Wu. "They've lost that edge obviously," he says, "but it doesn't mean they can't get it back."

Wu points to recent moves by Dell to increase its share of low-cost components from Taiwan. On a visit to Taiwan earlier this month, CEO Kevin Rollins told The Wall Street Journal that the company intended to boost its purchases of Taiwanese notebook-computer parts and other electronic hardware by more than 20% this year.

"I see them going back to their roots," says Wu, whose firm has no banking relationship with Dell.

The cost-restructuring likely will take a few quarters to carry out, Wu believes. And with no real PC-buying catalysts this year, 2006 is likely to be a throwaway year for Dell, he says.

"The stock's probably going to trade sideways near term because it's kind of in limbo," says Wu. "But when you start looking at 2007, and we get better visibility with the [Microsoft] Vista launch and new Intel processors -- that's when the stock starts to work."