Full 360-Degree Dell Earnings Preview (DELL, HPQ)

Dell Inc. (NASDAQ: DELL) is set to report earnings after the close and there is a problem outside of its fundamentals: its chart is in what we consider a technical no-man’s land.  While it has recovered about 10% in just the last week, the stock is almost equally wedged between the 50-day and 200-day moving averages.

Thomson Reuters has estimates of $0.49 EPS and $15.76 billion in revenues; next quarter estimates are $0.45 EPS and $16.22 billion in revenues.  As a reminder, Dell has performed better on earnings despite a lack of apparent catalysts.

In case Dell does offer an annual January 2012 forecast, Thomson Reuters has estimates of $1.92 EPS and almost $64 billion in revenues.  That is about 8-times expected earnings and the $29+ billion market cap gives a revenue multiple of less than 0.5 for the year.

At $15.60, the 50-day moving average is up at $16.15 and the 200-day moving average is down at $14.97.

Our take during mid-day trading is that options traders are braced for a move of up to about $0.65 in either direction. Keep in mind that the expiration date is just three days out on Friday, August 19, 2011.

Lastly, we have one key question… Since the PC business is now a lot like being in the toaster business, why does Dell remain in the Dividend Offender list?  Dell has more than $16 billion in liquidity at its last balance sheet date.

Just last week came a report where Jefferies was positive on rival Hewlett-Packard Co. (NYSE: HPQ) (also reporting this week) and cautious on Dell.  There was a different call from Raymond James, where Dell was raised to “Strong Buy” from “Outperform.”

Dell’s CFO Brian Gladden at the end of June noted that the service business has been boosted by Perot Systems and it should generate $10 to $11 billion in sales by 2015 from about $7.7 billion last year.  He also targeted annual sales of $4 to $5 billion from storage products versus just under $500 million last year.

JON C. OGG