Dell Inc (NASDAQ GS: DELL)

Don't bell the Dell: Stay away for the moment.

The computer hardware market consists of personal computers, servers, mainframes, workstations, and peripherals. The global computer hardware market generated total revenues of $370 billion which represented a compound annual growth rate of 4.8%. Sales of PCs proved the most lucrative for the global computer hardware market generating total revenues of $208 billion, equivalent to 56.7% of the market's overall value. The performance of the market is forecast to accelerate, with an anticipated CAGR of 5.9% and expected to drive the market to a value of $500 billion by the end of 2010.

Dell designs, develops, manufactures, markets, sells and supports a wide range computer system. These include enterprise systems (servers, storage, workstations and networking products), client systems (notebook and desktop computer systems), printing and imaging systems, software and peripherals, and global services.  The company also provides infrastructure consulting services; deployment services; asset recovery and recycling services; training services; enterprise support services; client support services; and managed life cycle services. Dell has a joint venture with CIT Group, Inc. to provide various financing alternatives, asset management services, and other customer financial services. The company sells its products and services directly to large corporate, government, health care, and education accounts, as well as small-to-medium businesses and individual customers. Dell generates revenues through its three business divisions: desktop computer systems (50.1% of total revenues), notebook computers (28.6%), and enterprise systems (21.4%).Foreign markets accounted for 38.3% of the total revenues.

Michael S. Dell is the founder, Chairman and Chief Executive Officer. He founded Dell in 1984. In 1992, Mr. Dell became the youngest Chief Executive Officer of a company ever to earn a ranking on the Fortune 500. Because of the phenomenal success of the company, he has been honored many times for his visionary leadership, earning the titles “Entrepreneur of the Year” from Inc. magazine, “Man of the Year” by PC Magazine, “Top Chief Executive Officer in American Business” from Worth Magazine and “Chief Executive Officer of the Year” by Financial World and Industry Week magazines. In 1997, 1998, and 1999, Mr. Dell was included in Business Week's list of “The Top 25 Managers of the Year”. In addition, executive search firm Heidrick and Struggles named him their “High Impact Chief Executive Officer” for 1996 and 1997. Mr. Dell attended The University of Texas at Austin. He is also a Member of the Computer Systems Policy Project. He is a Member of Foundation Board at World Economic Forum. Mr. Dell also serves on the U.S. President's Council of Advisers on Science and Technology and the governing board of the Indian School of Business in Hyderabad, India.

Donald J. Carty is the Vice Chairman and Chief Financial Officer. He served as Chief Executive Officer and President of AMR Corporation from May 1998 to April 24, 2003. He served as an Executive Vice President of AMR Corp. and its subsidiary, American Airlines Inc. since 1989. He also served as Chief Executive Officer of American Airlines and its President since 1995. He served as Chief Executive Officer and President of CP Air in Canada from 1985 to 1987 and spent several years in various management positions with Celanese Canada Ltd., Air Canada and the Canadian Pacific Railway.

Dell's main Competitors are Hewlett-Packard Company, Cisco Systems, Sun Microsystems, Iomega, Rackable Systems. Dell, the world's second-largest computer manufacturer posted fiscal third-quarter sales results that exceeded Wall Street expectations, but its profit performance and outlook for coming quarters left investors dismayed. Shares tumbled about 10%, to $25.25, in extended trading on Nov. 29, after the results were released, and continued the slide the following day. By late afternoon, Dell stock had lost more than 13% from the previous close.

Analysts say that under the watch of founder Michael Dell who returned as chief executive early this year, the company unnerved shareholders with news it will "continue to incur costs as it restructures" and "these actions may adversely impact the company's performance." Dell's expenses are "still considerably higher than we want," Chief Financial Officer Don Carty said during the company's first conference call with analysts in a year. The results suggest a long-running turnaround attempt may be proceeding more slowly than Wall Street anticipated. The company is struggling to emerge from almost two years of slowing growth and slipping market share. Dell's results contrast sharply with those of key competitor Hewlett-Packard which reported robust quarterly results and issued a rosy forecast. In the quarter ended Nov. 2, Dell recorded sales of $15.65 billion, exceeding Wall Street's estimate by about $300 million and representing a healthy 9% increase from a year earlier. Net income jumped 27%, to $766 million. But expenses as a percentage of revenue, a key measure of how well the company is managing costs, rose noticeably. Selling, general, and administrative expenses rose to 12.2% of revenue from 10.6% a year ago. Total operating expenses rose to 13.2% of revenue, up from 11.5% a year ago. Dell's operating income of $829 million was 5.3% of revenue, well below the 8% level that Dell posted in years past.

Earlier this year, Dell said it wants to reduce its workforce by about 10%, but as of Nov. 2, Dell had cut only about 2.5% of the 84,000 employees it had on Aug. 3. Carty insisted, though, that the company "is still driving to that [10% reduction] number." Carty added: "We've identified a considerable amount of low-value work." The company also is working to automate certain tasks to help it eliminate more employees. "We have more manual work going on than we need," he said. At the same time, he said that other initiatives, such as acquisitions or "new strategies," may mean keeping or hiring certain kinds of employees. Gross margin performance, too, didn't meet some analysts' expectations. Gross margin inched up to 18.5% of revenue, from 16.6% a year ago, but still fell below the 19% analysts were projecting. The company blamed component costs, saying they didn't decline as steeply as the company was projecting. Dell has been struggling with falling market share and profitability problems since 2005. Former CEO Kevin Rollins and other top executives, including many veterans, left this year, and Dell was forced to restate four years of results following a lengthy internal accounting investigation. Over the last six months, the company has hired a raft of outside executives and has begun making acquisitions, a strategy it almost never used in the past. It also has changed its sales model and over the summer began selling PCs in retail outlets around the world, including Wal-Mart Stores in the U.S. and Gome in China. That move has helped to slow the decline in Dell's consumer business. In the most recent quarter, revenue for its U.S. consumer business fell 6%, a smaller decline than in recent quarters. Despite the problems with its expenses, Dell reported some brighter news: It said revenue growth in overseas markets was robust. Combined sales in Brazil, China, Russia, and India, four crucial markets, were 32% of overall revenue. In all, overseas sales accounted for 46% of revenue, up from 44% a year earlier. Dell generated $1 billion in cash for the quarter, which Carty called "the ultimate litmus test" of Dell's performance. This money be partially used to resume the programmed share repurchase program in early December. A 5 year horizon paints a rosy picture for Dell. Wait and keep an eye on the developments before buying this stock.