For Dell Bulls, It's a Lonely World

If H-P's struggles are any indication, Dell could be in for a dismal quarter.
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SAN FRANCISCO -- Could expectations be any lower than they are for

Dell's

(DELL) - Get Report

fourth-quarter earnings report after the close Thursday?

Investors have been consistently pushing the stock down in 2009 -- continuing its brutal performance in 2008 -- even as tech stocks have been outperforming the broader market.

As you might recall, Dell's

third-quarter numbers

announced in November weren't exactly cause for celebration. While the PC maker did eke out profit that beat the Street's expectations, its revenue was a whopping $1 billion below estimates.

At the time, we compared the company's results to those of

Hewlett-Packard

(HPQ) - Get Report

-- this turned out to be a demonstration of the concepts of slowing growth vs. a steep dropoff in demand.

H-P's fiscal first-quarter desktop revenue fell 2%, compared with year-over-year growth of 6% three months earlier. Notebook revenue growth slowed to 21% from 26%.

For Dell, however, desktop revenue dropped 14%, on the heels of a 2% drop in the second quarter, while "mobility" revenue growth fell to 3% from 26%.

So, how are we feeling about Dell, after H-P said last week that its desktop revenue fell 25% from a year earlier, while notebook revenue was off 13%.

In other words, how should a Dell shareholder feel after H-P put out "Dell numbers" from three months ago?

Wall Street analysts have subsequently been running over each other to cut their estimates on the company -- a welcome change from the notion less than four months ago that Dell's revenue would near $70 billion this fiscal year. (The consensus estimate is now $55.5 billion, which would represent a decline of 10% from the just-completed year).

As there's no prize for being a Dell bull at the moment, it made perfect sense to see Bernstein Research analyst Toni Sacconaghi cut his fiscal fourth-quarter revenue estimate on Tuesday to $13.3 billion, well off the current consensus of $14.2 billion.

If Sacconaghi is right, we're talking about a revenue decline of 18% -- that's the state of the PC market. Even more worrisome, Sacconaghi suggests that Dell may have to add to its recent 8,900 job cuts to boost operating margins.

He also sees PC industry revenue declining 17% in 2009, which is far from the most bearish view out there, as Morgan Stanley analyst Kathryn Huberty said Tuesday she expects a 24% dropoff.

Huberty warned that the trend by global consumers toward low-fi "netbook" computers is hurting average selling prices as well as cannibalizing notebook computer sales.

While this is good news for Taiwanese netbook manufacturers

Acer

and

Asus

, the rest of the market has fallen behind.

Three months ago, we noted that Dell's shares, by conventional valuation measures, were cheap, particularly when they had dipped below $9.

The stock is obviously cheaper now at $8.41, but unlike beaten-down tech performers like

Google

(GOOG) - Get Report

,

Apple

(AAPL) - Get Report

, or

Amazon

(AMZN) - Get Report

, which are merely waiting to shoot higher with a healthier economy, the question of how much innovation Dell can deliver in the future is increasingly linked with its long-term stock performance.