Foolish Forecast: Dell Looks Dull

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On Thursday night, we'll get a second-quarter earnings report from computer systems maker Dell (Nasdaq: DELL). Look back at the last report and the numbers behind it, then come around here for a fresh look at the market.

What Fools say:
Here's how Dell's CAPS rating stacks up against some of its peers and competitors:

	Market Cap (billions)	Trailing P/E Ratio	CAPS Rating
International Business Machines (NYSE: IBM)	$174.2	16.7	***
Apple (Nasdaq: AAPL)	$163.3	38.2	****
Hewlett-Packard (NYSE: HPQ)	$112.8	15.6	****
Dell	$43.7	16.3	**

Data taken from Motley Fool CAPS on 05/27/2008.

"Average company with an average product that will never stand out," says Motley Fool CAPS player dieseldawg on behalf of our Dell bears. Other players point out that the competition has already copied Dell's made-to-order business model, leaving the company with no real moat.

On the bullish side of the fence, our players like Dell's growth initiatives in countries like China and Brazil, and they say the stock just looks too darn cheap to pass up.

What management does:
Growth on the top and bottom lines has restarted after a harsh 2006-2007 cycle, and gross margins are expanding as well. Net profits and cash flows remain rather steady as Dell tends to step on the advertising pedal whenever there's too much ash sloshing around the bottom of the cash register.

Margins	11/2006	2/2007	5/2007	8/2007	11/2007	2/2008
Gross	16.8%	16.6%	17.0%	18.3%	18.7%	19.1%
Operating	6.2%	5.3%	5.3%	5.8%	6.0%	5.9%
Net	5.0%	4.5%	4.4%	4.8%	5.0%	4.8%
FCF/Revenue	6.0%	5.4%	3.4%	5.0%	5.0%	5.1%

Growth (YOY)	11/2006	2/2007	5/2007	8/2007	11/2007	2/2008
Revenue	7.9%	2.9%	1.8%	1.1%	2.5%	6.5%
Earnings	(7.4%)	(28.3%)	(26.1%)	(3.7%)	2%	14.1%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
It looks like Michael Dell's turnaround efforts are getting some traction, but Dell is still losing market share to HP and has a long way to go before reclaiming that elusive "biggest computer seller in the world" crown.

HP is going the acquisition route to growth these days, picking up support specialist EDS (NYSE: EDS) for a pretty penny. Dell is cash-rich ($8.0 billion) and nearly debt-free, too ($362 million). Will the company make a landgrab soon, just to keep up with the Hewletts?

The latest third-party reports say that Dell's market shares are slipping in both the server and PC spheres. I'm expecting a sloppy showing from Round Rock, Texas. The shares are cheap, but perhaps for good reason.

Further Foolery:

• A Black Turtleneck for Michael Dell
• 5 Stocks to Bloom in May
• What It Takes to Retire Early