This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Dell On Deck: Hoping to Sidestep Cisco's Woes

ROUND ROCK, Texas ( TheStreet) -- Will Dell (DELL) and HP (HPQ - Get Report) sidestep the IT spending problems that hammered Cisco (CSCO - Get Report) when they report their quarterly results?

Dell, the world's No. 2 PC maker, is on deck first, reporting third-quarter results after market close on Thursday. Investors are keen to see whether the government weakness that left Cisco reeling is also resonating in Round Rock.

Public sector sales accounted for more than a quarter of Dell's total revenue during the second quarter, and the company's shares slumped after Cisco CEO John Chambers described the now-infamous "airpockets" in government spending last week.

"Cisco's commentary raises a red flag on Dell's above-peer government exposure," explained Mark Moskowitz, an analyst at JP Morgan, in a recent note. "If the government vertical were to pull back on IT spending, we think that Dell would have higher relative risk of operating slippage."

The analyst, who rates Dell underweight, also warns that the company's market share gains in servers and storage could be slowing, placing the company's gross margin firmly in the spotlight. With margins typically low in the PC business, areas such as servers and storage play a key role in driving Dell's profits, so investors will be closely monitoring the firm's third-quarter gross margin.

"We think that Dell's gross margins could exhibit little upward pressure as upside from higher-margin system sales potentially fades," explained Moskowitz. Wall Street is looking for Dell's gross margin to come in around 17.5%.

Overall, though, analysts are looking for decent third-quarter sales and earnings from Dell, which has been enjoying a healthy IT spending environment in recent quarters. Analysts surveyed by Thomson Reuters expect the company to report revenue of $15.74 billion and earnings of 32 cents a share, compared to sales of $12.9 billion and earnings of 17 cents a share in the same period last year, although this figure included 6 cents of organizational expenses and amortization.

The PC maker is also likely to face questions about its tablet strategy during Thursday's conference call, which TheStreet will be live-blogging. Dell, like HP, has been ramping up its tablet strategy, but is playing serious catch-up to Apple's (AAPL) iPad.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DELL $0.00 0.00%
CSCO $27.49 0.00%
HPQ $12.27 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs