Foolish Forecast: Dell's Family Affair

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Erstwhile computer king Dell (Nasdaq: DELL), now dethroned by Hewlett-Packard (NYSE: HPQ), reports its fiscal Q4 2008 earnings numbers Thursday afternoon. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

• Buy, sell, or waffle? Twenty-eight analysts follow Dell, giving the stock 18 buy ratings and 10 holds.
• Revenue. On average, they expect to see quarterly sales rise 13% to $16.27 billion.
• Earnings. Profits are predicted to rise 20% to $0.36 per share.

What management says:
Investors read Dell's latest acquisition news to the smooth sounds of Sly and the Family Stone:

It's a family affair, it's a family affair ...
One child grows up to be
Somebody that just loves to learn
And another child grows up to be
Somebody you'd just love to burn

Earlier this month, in an effort to break into the Software-as-a-Service (SaaS) field that salesforce.com (Nasdaq: CRM) currently dominates, the Dell family newsletter announced that brother Mike's Dell would be buying out brother Adam's MessageOne -- in which "Michael Dell, Susan Dell, a trust for the Dell's minor children, and Mr. Dell's parents" are all indirect investors.

Suspicious? Only partly. The Family Dell went out of its way to do this deal on the up and up. Among other efforts, Michael Dell recused himself "from all aspects of the decision-making process," and Michael, Susan, and the minor children are all going to donate their shares of the profit to charity. On the other hand, Adam and the 'rents can still make out like bandits on this $155 million deal.

What management does:
A company's entry into a new market often suggests a hunt for higher margins. But as you can see below, Dell's actually been doing a decent job of improving hardware-based margins all on its own. And I can't help but notice that Dell's own hardware profit margins aren't just better than Sony's (NYSE: SNE), Lenovo's, or Sun's (Nasdaq: JAVA) -- they're also a good sight better than what SaaS specialist salesforce.com usually produces.

Margins	8/06	11/06	2/07	5/07	8/07	11/07
Gross	16.8%	16.8%	16.6%	17.0%	18.3%	18.7%
Operating	6.4%	6.2%	5.3%	5.3%	5.8%	6.0%
Net	5.1%	5.0%	4.5%	4.4%	4.8%	5.0%

Two Fools say:
Two separate Fool newsletters maintain Dell as an active recommendation. At Motley Fool Inside Value, our analysts commented in December that they like Dell's decision to begin selling notebooks and PCs through Best Buy (NYSE: BBY). Meanwhile, next door at Motley Fool Stock Advisor, the preference is less for buying low-margin SaaS businesses, and more for buying back Dell's own stock. Stock Advisor heaped praise on management's decision to spend $10 billion on share repurchases. Take a free trial of either newsletter, or both, to find out all about the analysts' opinions.