Dell 2Q Earnings Preview: Now In Third Place, Where?s New Growth?

Dell (Nasdaq: DELL), the No. 3 PC maker, is scheduled to report second-quarter results Tuesday below last year's. For the first time, the company founded by Chairman Michael S. Dell nearly 30 years ago in a dorm room will be ranked No. 3 in PC sales, having lost its No. 2 ranking last quarter to China's Lenovo Group (Pink: LNVGY).

Nevertheless, analysts expect decent performance, a down-to-earth forecast from Dell and CFO Brian Gladden, especially as the industry ramps up shipments of Ultrabook-based chips from Intel (Nasdaq: INTC), the No. 1 chipmaker, and software king Microsoft Corp. (Nasdaq: MSFT) starts to ship Windows 8.

As well, they'll wonder where Dell fits in with tablets, where it's not been visible, perhaps a telephone product and more crucially, storage and services, where the company has moved aggressively, acquiring companies like Perot Systems and Compellent Technologies. The idea is to boost Dell further into the corporate market and derive more revenue from services along the model of International Business Machines Corp. (NYSE: IBM).

Analysts surveyed by Thomson Reuters expect Dell to report earnings around 45 cents a share compared with 54 cents a year ago. Revenue is expected to dip about 6 percent to $14.7 billion. Net income is expected to be about $844 million compared with $1.06 billion a year ago.

Analyst Shaw Wu of Sterne Agee expects Dell to match or slightly exceed the estimates because "expectations are low." The company's PC status places it "in a tough fundamental position" between the low-cost players like Lenovo and Taiwan's Acer Group (Taipei: 2353) and Apple (Nasdaq: AAPL), the world's most valuable technology company, at the high end.

Dell has made giant strides in sales to the so-called BRICS countries -- Brazil, Russia, India, China and South Africa -- but now may have to deal with reports of slower growth in India and China. Dell's India chief last week complained about doing business in India.

Other analysts are looking at different aspects of Dell strategy. At Stifel Nicolaus, Aaron Rakers wants to see more muscle in software, which accounted for about $400 million last fiscal year but is tapped to grow to $2 billion by fiscal 2016. Last week, he cut his price target for Dell to $17 from $18 after trimming his earnings estimates to $1.92 a share for full-year earnings from $2.01.

Dell shares closed Monday at $12.56, up 34 cents, valuing the company at $21.97 billion. They've lost 14 percent in 2012 and 10 percent over the past 12 months.