) -


(HPQ) - Get Report

reports its third-quarter results after market close on Wednesday hot on the heels of underwhelming

quarterly numbers

from arch PC rival


(DELL) - Get Report


With Dell noting a "challenging" environment for PC sales, it's doubtful that HP, as the no.1 PC maker, will be able to escape feeling the same strain.

"We expect Hewlett-Packard to discuss similar challenges around its PC business this evening," explained Brian White, an analyst at Topeka Capital Markets, in a note released on Wednesday.

Jayson Noland, an analyst at Baird Equity Research, also thinks that PCs could pose a problem for HP. "We anticipate the company will continue to report soft revenue given significant exposure to Consumer PCs, challenges in Server, and structural issues in Services," he explained, in a recent note.

Analysts surveyed by

Thomson Reuters

expect HP to report sales of $30.1 billion and earnings of 98 cents a share, down from $31.2 billion and $1.10 a share in the same period last year.

HP, however, comfortably beat Wall Street's estimates with its

second quarter

results, winning


for CEO Meg Whitman.

Nonetheless, the numbers suggest that HP's PC business was hardly booming during the quarter. Revenue from the company's Personal Systems Group (PSG) came in at $9.5 billion, flat compared to the same period last year. Within PSG, HP's notebook PC revenue was down 3% on the prior year's quarter, while desktop PC sales climbed 5%.

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Topeka Capital Markets' White thinks a big miss may be in the offing.

"We believe HP will meaningfully miss our PC sales forecast that calls for notebook computing sales to fall by 2% quarter-over-quarter and desktop PC revenue to be flat sequentially," he wrote, in a note released on Tuesday. "In fact, we believe the PC sales miss could be as high as $1 billion."

White, who has a hold rating and $23.50 price target on HP, predicts PSG revenue of $9.358 billion.


will be live-blogging HP's third-quarter earnings, starting at 3.45PM ET:

Despite the soft PC spending environment, though, HP has indicated earnings upside. Earlier this month, the tech giant


its third-quarter earnings guidance, projecting a profit of at least $1 a share, compared to its prior outlook of 94 to 97 cents a share.

Investors welcomed the news, injecting some much-needed life into HP's stock. Shares of the Palo Alto, Calif.-based company, which have tumbled more than 24% so far this year, are up almost 3% since its outlook hike.

Baird analyst Noland, however, remains unmoved. "We would view near-term EPS strength as temporary and driven by opex reductions associated with the accelerated restructuring," he explained.

When it raised its guidance, HP also updated the amount of the third-quarter pretax charge related to its recent restructuring program. The company now expects to record a charge of approximately $1.5 billion to $1.7 billion, up from its prior estimate of approximately $1 billion. The change was driven primarily by a higher-than-anticipated acceptance rate of HP's retirement program and faster-than-expected implementation of the firm's workforce reduction plan.

"Given our expectations for a sales shortfall, we believe cost reductions and expense controls were necessary to drive better than expected EPS performance," notes Topeka Capital Markets' White, who believes the company will fall short of his overall revenue forecast of $30.28 billion.

HP shares dipped 2.91% to $19.35 on Wednesday. Dell's stock was plunging 6.6% to $11.52.


Written by James Rogers in New York


Follow @jamesjrogers

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