Dell and Hewlett-Packard will Announce their Earnings

The world’s two largest computer manufacturers Dell (DELL-US) and Hewlett-Packard (HPC-US) will announce their earnings after Thursday’s trading. The two companies’ views on market demand for Chromebooks and whether the recent Delta variant virus affects the outlook are the key points.

As schools and offices begin to reopen, the market predicts that the growth of consumer computer demand will slow down and commercial demand will accelerate. In addition, there is currently evidence that the demand for Chromebooks is slowing, which may have a greater impact on HP than Dell.

However, the interference of the Delta variant virus is preventing companies from restarting their offices and allowing component shortages and transportation costs to continue. These problems have become a problem for every technology industry, Dell and HP are no exception.

Due to supply chain and logistics challenges, research and research agency IDC this week lowered its global computer shipment growth forecast from 18% to 14.2% this year. The growth rate is expected to drop by 1.2%.

In addition to the computer market, the two companies also have their own focus in the commercial market. For HP, the return of companies to the office is expected to promote the corporate photocopier business, so the company’s vision for the Delta virus and photocopiers has become critical.

HP previously forecasted non-GAAP earnings per share of 81 cents to 85 cents per share in the third quarter of the fiscal year (as of July). The market estimated EPS of 84 cents and revenue of $15.9 billion, the same as in the second quarter. The annual increase is about 11%.

Dell’s focus is on providing enterprise servers and storage services. These products and Dell’s business computer business are the direct beneficiaries of the recovery of corporate IT spending. The company’s spin-off of VMware (VMW-US) is expected to be completed before the end of the year, and will use the released equity gains to substantially reduce debt.

Dell expects that demand will remain strong in the second quarter of the fiscal year (as of July), but due to supply constraints, the quarterly revenue growth rate will be slightly lower than 6%, which is lower than the previous seasonal average growth rate. Wall Street estimates that revenue will reach US$25.5 billion, a 4% quarterly increase, 12.3% annual growth, and an EPS of US$2.03.

Citi analyst Jim Suva believes that due to concerns about slowing demand for computer orders, especially in the consumer PC and Chromebook markets, both stocks are facing some pressure, but he believes that the market has over-interpreted the worries of the sharp decline in demand.

Suva believes that Dell is still the first choice in the field of corporate hardware. Under the condition of spinning off VMware and repaying debt, the stock’s valuation has the potential to increase.

Evercore ISI analyst Amit Daryanani said that Dell’s PC market share continues to grow, and its enterprise storage business performs well. In contrast, HP’s recent decline in market share may be affected by the slowdown in Chromebook demand.

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Summary

The world’s two largest computer manufacturers Dell (DELL-US) and Hewlett-Packard (HPC-US) will announce their earnings after Thursday’s trading.

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