Wednesday, February 28, 2007

Calls of Note Part 3

- JP Morgan notes Dell (NASDAQ:DELL) is scheduled to release its January quarter results after the market close on Thursday, March 1. With the resignation of the former CEO, Kevin Rollins, on January 31, the company noted that results for the quarter would be below consensus expectations.

Even JPM's recently lowered estimates could prove optimistic. They are looking for EPS of $0.29 on revenues of $15.10 billion for the quarter, versus consensus of $0.29 and $14.88 billion. Nevertheless, incremental weakness in desktop and server units could lead to further disappointment.

HP's substantial share gains are unlikely to ease in the near term. HP reported that it grew its overall PC units by 19% year over year for the January quarter. Meanwhile, th firm is optimistically assuming that Dell's PC units decline by 4% for the quarter.

Dell is unlikely to provide guidance or host a conference call. Nevertheless, the firm believes it is probable that consensus expectations will trend downward following the release. They are maintaining their Neutral rating, downside risk remains. Dell is trading at 19x firm's calendar 2007 estimates including options expense, and 17x excluding options expense. This represents a 15% premium to the SandP 500. THeybelieve this premium may erode in coming quarters and still prefer HP's shares for PC and enterprise exposure.

Notablecalls: Not actionable but good to know category. Shows you where the expectations stand.

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