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Computer
maker Dell (NASDAQ:DELL) and technology giant Hewlett-Packard (NYSE:HPQ) are
expected to post gains and slight losses, respectively, in revenue growth in
Dell’s second-quarter and HP’s third-quarter earnings reports, according to a
research note from Bernstein Research.

Dell
is expected to post revenues of $15.77 billion, representing a year-over-year increase
of 1.5 percent. HP is expected to deliver revenues of $31.1 billion, for a 2.3
percent drop in YOY growth. Dell and HP received an outperform rating with
price targets of $20 and $60, respectively.

The
report also said Dell, due principally to a highly favorable component price
environment, higher-than-expected share repurchases in Q2 and a continued focus
by the company on higher margin/solutions oriented offerings, was given a
higher consensus for 2012 earnings. However, analysts continue to believe that
Dell’s full-year revenue guidance is unrealistic.

“While
we do worry about a potentially deteriorating macro-economic backdrop, which
historically has led to underperformance in Dell’s stock, we continue to like
Dell as a near term trade, simply because we believe that Dell’s valuation is
compelling,” the researchers noted. “While we struggle with how much multiple
expansion (and how quickly) investors will afford Dell, given longer term
concerns about its portfolio, and the likelihood that revenue expectations may
be too high, we do believe that another quarter or two of continued strong
margins at Dell will likely increase investors’ estimates for what normalized
baseline margins might be for Dell going forward.”

The
report said following two disappointing quarters, it is critical that HP meet
Q2 expectations and reaffirm guidance for 2011, and investors should focus on
services profitability and signs of competitive or margin pressure across HP’s
other business units. The note also expressed disappointment that the company
had missed opportunities with its tablet offering, the TouchPad, which
Bernstein analysts felt should have been offered at a more competitive price.
While HP began to offer discounts in recent weeks and recently reduced the
price of the TouchPad by $100 (to $399/$499), analysts worry that the price
cuts signal weaker-than-expected sales and that strong discounting could
discourage developers given that it suggests limited traction with customers.

“Given
results for our covered companies that reported in July and our channel checks,
we believe that enterprise demand was solid in the April-July timeframe, that
public spending was weak but did not worsen, and that emerging markets remained
robust,” a senior analyst from Bernstein Research wrote. “Overall, we expect
Dell and HP to deliver relatively in line (for HP) and modestly below (for
Dell) consensus revenues this quarter, but materially stronger than expected
earnings per share (EPS). Guidance is the key question, given uncertainty about
government spending and the prevailing macro-economic backdrop, but we expect
both companies to at least reaffirm EPS guidance.”