Analyst: Price a Wild Card for PC Maker Dell Next Year

By Jessica Davis  |  Print this article Print

Ahead of Dell's quarterly earnings release this week, one analyst firm provided a preview and analysis of Dell's challenges in the year ahead, including price erosion and lower revenues. In contrast, Dell competitor HP reported better than expected earnings and revenues in its most recent quarter.

While competitor Hewlett-Packard reported better than expected earnings and revenue in its quarterly announcement this week, the picture for Dell in the year ahead is not nearly as bright.

In a preview of Dell's earnings announcement slated for Thursday, financial analyst firm Bernstein Research said it was lowering its revenue and earnings estimates for the PC maker for its fiscal 2010, which ends in January 2010.

"We forecast -3 percent revenue growth for Dell in FY10 and essentially flat earnings per share growth," writes Toni Sacconaghi Jr., senior analyst at the firm and author of the report. "While we do expect Dell to improve margins year over year, weaker revenue growth and a potentially more difficult industry pricing environment are likely to limit the company's progress."

Factors that could affect the company's performance are pricing pressures and further deterioration of bad debt in Dell's financing business. But Sacconaghi remained positive about Dell's prospects in the long term.

"We continue to believe that Dell has long-term potential to return to operating margins of 8 percent and that the stock is attractive on this basis," he writes. "Moreover, we believe that Dell's fortunes are largely in its own hands. That said, management has not executed to date, and market headwinds are getting stronger, making the timing of Dell's turnaround increasingly uncertain."

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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