Slower global demand could hurt Dell, HP

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HP and Dell, the world's No. 1 and 2 personal computer makers, should deliver solid numbers in their quarterly earnings, with notebook sales likely leading growth, analysts said.

Key to that success is their performance outside the United States, where the credit crunch, a deteriorating housing market and other economic troubles have crimped consumer spending.

Analysts expect HP on Tuesday to report third-quarter fiscal 2008 earnings before items of $2.11 billion, or 84 cents a share on revenue of $27.4 billion, according to Reuters Estimates.

Dell on August 28 is projected to post second-quarter fiscal 2009 earnings before items of $721.4 million, or 36 cents a share, on revenue of $15.9 billion, according to Reuters Estimates.

"Despite an increasingly difficult enterprise spending environment in the U.S. and parts of Europe, reasonable growth expectations, strength in emerging countries, currency, and product cycles should be enough to drive some upside for each company," Goldman Sachs analyst David Bailey wrote in a note to clients earlier this August.

Goldman said HP and Dell should at least meet Wall Street expectations.

So far, countries like Brazil, Russia, India and China - the "BRIC" nations - have held up global sales for HP, Dell and many other big technology companies. Any slowdown there, with no sign of a larger economic recovery in the United States, could pressure future performance this year.

"They're ... very high-growth economies but they're still subject to volatility," said Jayson Noland, an analyst at Robert W. Baird & Co Inc.

"I think China's just kind of a who-knows. It's so hot, it has to come down eventually," he said. "Even if China goes from 25 percent to 15 percent year-over-year growth, it can cause some volatility." Noland said that 70 percent of HP's revenue comes from non-U.S. sales.

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