Dell?s Report Likely PC Weathervane with Color Likely on Tablets

With Dell expected to report better-than-expected second quarter results Tuesday, the real color may be in the comments CEO Michael Dell makes about the future of the industry.

The reason is that the Round Rock, Tex.-based No. 2 in PCs may have to change tactics again to tap into the faster-growing market for smartphones and tablets, where growth is skyrocketing. Meanwhile, Dell will need to preserve its role as a solid supplier to the corporate market, having added storage, management software and security to its portfolio.

It's a challenge Dell, 46, has met before. After all, he stepped down as CEO when he was 39 only to come back in 2007 after his successor, Kevin Rollins, a management consultant who lacked Dell's innate feel for customers and markets, faltered. Dell lost market share, conducted one of the consumer electronics industry's biggest-ever recalls of laptop batteries after one of them caught fire and was embroiled in an accounting scandal.

The company hasn't looked back since Michael Dell returned, retaining its No. 2 share in PCs, around 12 percent, with HP holding about 19.5 percent worldwide, estimates IDC.

Dell shares rose nearly 4 percent Monday to $15.41, about mid-range in their yearly performance but nearly 30 percent above their price a year ago. The company's market capitalization stands around $29.2 billion, compared with HP's $67.2 billion.

Analysts expect Dell to say revenue rose to $15.8 billion with earnings of 49 cents a share, according to ThomsonFirst Call. But some like Bernstein's Toni Sacconaghi believe they will be 57 cents and UBS Securities' Maynard Um 54 cents because of lower component prices and strong growth in developing markets.

What Michael Dell and CFO Brian Gladden say during an investor call may indicate if the company plans any shifts, or reaction to recent events such as Google's purchase of Motorola Mobility, the patent wars in the smartphone business and where Dell plans to play in the tablet sector.

Last quarter, Dell reported holding cash and investments exceeding $14.4 billion. It tapped some of it to acquire privately held Force10, of San Jose, Calif., to augment its data center and server capacity, the latest acquisition in the sector. In February, it acquired Compellent Technologies of Eden Prairie, Minn., for $960 million, which boosted its storage assets.

But in an era when consumers are enthralled with iPhones and Android-based rivals, Dell's Streak 7 models don't get a lot of attention. Nor do its Value Pro tablets, which compete against the iPad2, HP's TouchPad and their rivals.

Besides its own global network of highly efficient factories, in places like Malaysia, China, Brazil, Ireland, Poland and India, the company has usually had an excellent logistics network. So it can easily ramp up production of new products quickly.

As well, it's long had a good relationship with Motorola. When Michael Dell returned as CEO, he hired senior Motorola consumer chief Ron Garriques, who ran Dell's Global Consumer Product Group from Singapore. Garriques announced plans to leave this year.