Updated from May 15

Shares of Dell ( DELL) slid a day after the hardware maker failed to offer any upside in sales guidance for the second quarter. For a serial overachiever, it seems meeting Wall Street's expectations isn't enough -- investors want Dell to beat them.

The stock was off 74 cents, or 2.3%, to $31.44 in midmorning trading.

"Given the recent run-up in the shares and the minimal upside to the quarter, it would not surprise us if the stock came under some pressure," says Lehman's Dan Niles in a morning note. Dell shares have shot up 41% from their year-to-date low in February. Lehman does no banking for Dell.

Niles, who has an equal weight rating on the shares, says he's a little unsettled by Dell's valuation of more than 30 times calendar '03 earnings, given what he calls "the backdrop of continued sluggish IT demand."

In that vein, Niles was surprised by Dell's forecast for a sequential contraction of 6% in second-quarter computer shipments; he's been forecasting a decline of only 3%. Yesterday, Dell CFO Jim Schneider said the information technology spending environment appears to have stabilized, but didn't offer any fodder for those hoping for a near-term recovery.

At Merrill Lynch, Steve Milunovich likewise said he was staying neutral on Dell shares given their valuation. "We certainly consider Dell a core holding but would not chase it here," he said in a note. But on a fundamental note, he added, there's not much to worry about.

"We agree with Michael Dell that there is lots of share to be gained. Dell's PC share of 17% could go to 30%. Its enterprising computing share should rise." Even services will likely commoditize over time, thus playing to Dell's strengths, notes Milunovich. Merrill doesn't do any banking for Dell.

Other analysts were more upbeat on Dell shares, praising the company's predictable outperformance. "Clearly the stock's not cheap, but I think Dell deserves to trade at a premium given its consistency and the fact that it's growing at a much faster rate than the industry," says Robert Cihra of Fulcrum Global Partners, who has a buy rating on the stock. "I would say the quarter was pretty well dead in line on almost every metric that we and most analysts were looking for." Fulcrum does no investment banking.

In the just-ended first quarter, Dell's revenue of $9.5 billion was up 18% from last year's levels. Net income rose 31% to $598 million, with earnings per share at 23 cents vs. 17 cents a year ago.

Gross margins increased to 18.3%, up from 17.2% a year ago.

The company said global shipments grew 29% from last year's levels, while the rest of the hardware industry suffered an average decline of 1%. Shipments grew 40% in Asia Pacific and Japan, and 29% in Europe, the Middle East and Africa.

Dell boasted its 40% increase in server shipments was quadruple the average of other vendors.

Meanwhile, its famously tight control over operating expenses has grown even tighter, with expenses as a percentage of revenue falling to a record-low of 9.8%, down from 9.9% a year ago.

The hardware maker has $10.3 billion in cash and investments.

Unit volumes are expected to be up 25% from year-ago levels, which the company noted was "markedly ahead of the predicted 3% growth for the rest of the industry."

Management also said Dell-branded printers, which debuted last quarter, had sold at double the rate of internal projections, but that investors shouldn't expect any near-term significant impact on the bottom line because the business remains very small measured against the size of its profit and loss.

Dell endorsed Wall Street expectations on guidance, saying second-quarter revenues should rise to $9.7 billion, compared with analysts' estimates for $9.75 billion. The outlook implies growth of 2% from the prior quarter and 15% from year-ago levels. Earnings should grow a penny from the prior quarter to 24 cents, up 26% from the same quarter in '02.

"Typically, the second quarter sees slower corporate and consumer spending , with seasonal strength in education," said CFO Schneider on the conference call. "We have not seen anything to suggest that is not the case this year."

Merrill analyst Milunovich said earlier in a research note that state budget cuts in education could weigh on Dell's U.S. business. Though Dell today declined to break out how much of its revenues come from the education sector, Milunovich estimated the percentage of sales from education at 15% to 20%. Merrill has no banking relationship with Dell.

Schneider also predicted industry hardware-unit shipments will be down 6% sequentially, with related revenues down a little more, an outlook he says is "roughly in line with historical trends and consistent with analyst expectations." In contrast, Dell expects its second-quarter unit sales to be up 2% to 3%, with revenues about $200 million above the first quarter.