Earnings Preview: Strong PC sales to boost Dell revenue; analysts eye costs, profitability

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Earnings Preview: Dell Inc. to post 1Q results

SEATTLE — Computer maker Dell Inc. reports its fiscal first-quarter results Thursday after the closing bell.

WHAT TO WATCH FOR: How well Dell has been able to take advantage of businesses resuming spending on new technology.

Earlier reports from technology bellwethers such as Intel Corp., which makes the microprocessor “brains” inside of the majority of the world’s PCs, indicate companies are replacing aging servers and, to some extent, employee PCs, after having shut down spending during the worst of the recession.

Consumers led the turnaround, but Dell didn’t benefit as much as competitors such as Hewlett-Packard Co. and Taiwan’s Acer Inc., because Dell makes most of its money from selling PCs to businesses.

Wall Street analysts will be looking for Dell’s take on how quickly corporations will be back to normal spending patterns for technology. But they say they’ll also look beyond PC revenue and focus on numbers that show how Dell is managing its costs: operating expenses and gross margin.

WHY IT MATTERS: In the quarter that ended in April, prices for certain components including memory were higher. Credit Suisse analyst Bill Shope wrote in a May 14 research note that he also worried Dell had switched strategies from preserving profits to cutting prices to gain market share. That, and the higher component costs, could undercut whatever gains Dell might get from selling more PCs, Shope wrote.

Maynard Um, an analyst for UBS, wrote in a note to investors on Monday that he’s watching operating expenses for signs Dell is adding to its reach in new regions or new distribution channels. Um also said he’d be listening for executives’ thoughts on cutting prices to gain market share, which he called a “wild card” that could affect profitability in the quarter.

WHAT’S EXPECTED: Analysts polled by Thomson Reuters expect Dell to earn 27 cents per share, excluding one-time items, on $14.26 billion in revenue.

LAST YEAR’S QUARTER: Dell earned 15 cents per share on $12.3 billion in revenue. Excluding a charge from closing facilities and laying off workers, it earned 24 cents per share.