Do Hewlett-Packard and Dell need to make big job cuts?
As Dell (DELL) and Hewlett-Packard (HPQ) get ready to announce quarterly earnings, analysts are concerned that the downturn in the global PC market will undermine their results. That assumption seems fair enough. Overcoming a trend that hit every major market in the world is nearly impossible.
In addition to the recession, another factor that could hurt earnings is the rise of netbooks, which can cost as little as $300 and do not produce the margins that $1,000 laptops do. Add into that mix the fact that smartphones like the Apple (AAPL) iPhone now have enough computing power and 3G connectivity to compete with low end PCs.According to The Wall Street Journal, both companies are likely to have a hard time producing good earnings, but "HP and Dell's financial results are likely to diverge." Dell does not have access to as many retail outlets. It also does not have the big consulting and software businesses that HP does.
How does Dell salvage earnings going forward? If the recent past is any indication the company will make more expense cuts and will probably lay off more people in the process.
A weakened Dell not only helps HP. It opens up an opportunity for Asia-based Acer and Leveno to pick up market share. Dell may not be the No. 2 PC company in the world for much longer.
Douglas A. McIntyre is an editor at 24/7 Wall St.