Why Dell Can't Keep Up With HP

The Texas computer maker is expected to report lower earnings Thursday.

Dell's earnings are expected to drop nearly 20% when it reports third-quarter results late Thursday.

Analysts polled by Thomson Financial expect the Round Rock, Texas-based computer maker to report earnings of $615.99 million, or 31 cents a share, compared with $766.0 million, or 34 cents a share, for the same year-ago period. Sales, however, are expected to tick slightly upward to $16.2 billion from $15.6 billion.

Dell's shares have fallen nearly 60% over the past three months, hammered in the wake of a disappointing second quarter and a financial crisis that has rocked some of the information technology sector's largest customers.

By contrast, shares of Hewlett-Packard (nyse: HPQ - news - people ) surged 10.7% Tuesday when it surprised investors by pre-announcing earnings, excluding one-time items, of $1.03 per share--better than the $1 per share consensus reported by Thomson Financial. HP also forecast sales of $33.6 billion, compared with analysts' expectations of $33.1 billion.

HP will detail its financial results next week, but industry insiders expect the company to quietly outpace rivals such as Dell (nasdaq: DELL - news - people ), thanks to its ability to pump more PCs into retail outlets and build new products. It also has a vast consulting force able to drive sales of everything from servers to printers and desktop computers.

The latest example of HP's prowess came Wednesday when it rolled out a new $1,149 touchscreen laptop. While less hyped than Apple's (nasdaq: AAPL - news - people ) multi-touch technology used on the iPhone and on its notebooks, HP is quietly putting its own stamp on the Microsoft (nasdaq: MSFT - news - people ) software it builds its PCs around.