Dell Earnings Could Reveal Rebound Success, Financing Deal

Dell executives are also slated to field questions from analysts and reporters following the Nov. 29 earnings announcement - - something they haven't done in more than a year while directors at the company investigated prior misconduct in its accounting and financial reporting. With the directors' investigation now complete and earnings for several years having been restated, Dell is hoping it can put those problems behind it and deal with more familiar issues of sales, profit and an operation that has been in and out of a slump for more than two years.

The tale of the tape: the average of financial analyst expectations, as measured by Thomson Financial, calls for Dell to turn in earnings of 35 cents per share, compared to 30 cents per share for the same quarter a year ago. The analysts, on average, also expect Dell to report revenue of $15.34 billion, compared to revenue of $14.38 billion for the same quarter a year earlier. But even though such a report would show Dell continuing to grow, the Round Rock, Texas-based company would still fall short of rival Hewlett-Packard's top-line growth of 15 percent.

And while HP has been taking a victory lap, having reached the $100 billion mark in annual sales, other ominous signs have been looming for Dell. Not only has Dell seen its PC market share - - both worldwide and in the U.S. - - under pressure for more than a year, it's reportedly also starting to lose momentum in other areas. Earlier this month, research firm DisplaySearch, Austin, Texas, said Dell had lost its position as the world's Number 1 provider of desktop LCDs, as it had been overtaken during the most recent quarter by component maker Samsung.

"Dell's customer base is less willing to adopt newer technologies due to legacy infrastructures and has been slower to recognize the potential usability gains associated with wide-screen displays, so they have not updated corporate standards from 17-inch SXGA or 19-inch SXGA displays," DisplaySearch said. "This was problematic for Dell, particularly in the past quarter, as its panel-vendor sources continued to shift to wide-screen displays. While this supply disconnect has seemingly reached a new peak, it could continue until commercial purchasers go through a complete PC refresh cycle, slated by many to begin in 2008, when they change from Windows XP over to Vista and thus will change their software and hardware standards together, becoming more receptive to the new crop of wide-screen displays."

More information may also emerge this week about the future of Dell Financial Services, the financing partnership that has been a part of $6 billion in annual sales for Dell. DFS is currently a joint partnership between Dell and CIT Group, but Dell has the contractual right to buy out CIT's 30 percent share starting in February. "If Dell exercises its purchase option, in addition to paying CIT the Option Price, Dell is required to pay CIT an amount equal to the balance in its capital account with DFS," CIT said in a recent filing with the U.S. Securities and Exchange Commission. "While Dell has not yet communicated to CIT whether it intends to exercise its purchase option, Dell and CIT are in discussions regarding the Option Price calculated by DFS pursuant to the joint venture agreement."

Dell has said previously an acquisition of CIT's share could cost it more than $300 million, depending on several factors including market value of DFS at the time.

And, of course, Dell is in the midst of restructuring is entire business model from an almost exclusively direct sales operation to one in which the company sells both direct and via the commercial reseller and consumer retail channels. Dell executives have said they are on track to launch a new channel program by year's end, after running a pilot deal registration program with VARs for at least several weeks. It's not clear if Dell will provide more details on its channel intentions during its earnings report or conference with press and analysts.