Does 'Surface' Mean Another Poor Quarter for Dell and HP?

NEW YORK (TheStreet) -- Monday's announcement by Microsoft (MSFT) must have left Dell (DELL) and Hewlett-Packard (HPQ) scratching their heads wondering "now what?" From Dell's and HP's point of view the best part of the presentation is Microsoft knows more about what colors are available for the new Surface than pricing or the timing of release.

It appears Microsoft has a potential winner in this product, but who can honestly know when the company hasn't disclosed pricing or availability? If the Surface announcement is meant to be more than a heads-up for the competition, Microsoft better price it right, and start moving product well before the holiday season around the corner.

HP and Dell can cross their fingers Microsoft has more trouble gaining consumers interested in Surface than they had filling up the venue location for the announcement. (Read my article Should Apple Fear Microsoft's Coming Tablet Assault?)

Both Dell and HP are in the Wall Street dog house. Dell's stock is down 24% from a year ago and HP has fallen a whopping 40% from this time last year. As I write this article, HP is within 60 cents of the 52-week low. While Microsoft trades 4% higher and the S&P 500 ETF SPY (SPY) trades up 1%, Dell and HP are flat to lower.

Obviously, there are more ingredients that go into the pricing soup for the day; however, both companies are struggling and both will soon list one of their biggest vendors as a major competitor. Any given day's price movement doesn't mean a whole lot in the longer scheme of things anyway.

What matters are the gaps down in price both companies have recently experienced and how long it will take to recover. As I wrote in a recent Dell-focused article, it may take two strong quarters to fully bring back Dell's stock price. Dell received a boost after announcing a dividend, but a dividend is far short of earnings, and that is what Dell needs. Dell should have announced the dividend a few years ago. Better late than never I guess.

Along with its first dividend, Dell also announced a cost-reduction program. Dell is hoping they can cut costs by $2 billion. It won't be an easy feat and based on the market reaction, Michael and the crew in Texas have their work cut out. (Read my article Microsoft's Impressive Product Still Needs Perfect Execution.)

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