Final Review of Dell Ahead of Earnings (May 31, 2007) (DELL, HPQ, GTW)

Dell Inc. (DELL-NASDAQ) is actually back from the depths as far as the stock has been doing since Michael Dell returned to oust Kevin Rollins.  Wall Street is expecting $0.26 EPS and $13.95 Billion per First Call estimates for after the close today.  The real turnaround and focal shifts are still "pending" as far as the real guts and real details.  In fact, the company may actually need to keep some of its critics, analysts, and journalists guessing so that Hewlett-Packard (HPQ-NYSE), Acer, Apple (AAPL-NASDAQ), Gateway (GTW-NYSE) and Lenovo.

The stock closed at $24.22 the day (January 31, 2007) the announcement came that Michael was retaking the lead and shares are now up at $26.55.  On that same day, Hewlett-Packard shares closed at $43.19 and those shares are at $45.65 now.

The SEC probe still pending on options issues and financial reporting delays are still there.  This is not a quick fix.  Michael took the squeeze and extreme-JIT (just in time) manufacturing and competitors were able to adapt the model in perhaps a better manner of late.  Shipments are down at Dell, while H-P has increase its shipments.

Wal-Mart is the first of what will probably be many on-site and outlet retailer sales arrangements for the company.  That will drive up costs for furnishing that many extra PC’s on-site at retailers, but it may ultimately help itregain some market share.  It also recently moved to include Linux-based PC offerings and it is no longer solely "Intel-inside."

The company will not be taking questions from investors or from Wall Street after earnings, so you’ll basically get the press release and a bunch of analyst comments tomorrow.  As long as the company can stay profitable without major downside disappointments and doesn’t lose ridiculous market share in projections, then calling for a quick fix out of Michael Dell will be unwarranted.

This is not going to be a one-day fix, and anyone holders thinking this is just a quick fix and flip is probably being unrealistic.

Jon C. Ogg
May 31, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.