Can Dell Surprise? (NASDAQ: DELL)

Dell Inc. (NASDAQ:DELL) will report third quarter earnings after the market closes on November 19th with an analyst conference call to follow at 4:00 PM, Central Standard Time.  While Analysts expect Dell to show a year over year decline with revenues this year of 13.1 billion and earnings per share of .28 versus last year's 15.2 billion and EPS of .37, the central focus of this quarter's conference call should be Dell's aggressive expansion plans.

Dell recently fell behind Taiwan's Acer Corporation to settle in as the world's third largest PC supplier, following Acer and industry leader Hewlett Packard.  But in a somewhat controversial move, Dell acquired Perot Systems in September in order to better compete with the likes of Hewlett-Packard and IBM in offering Information Technology services.  Some analysts fear the acquisition costs and operating expenses involved in merging the companies may eat into the expected growth revenue.  And this week Dell took another major step in expanding its business when it announced it would be entering the SmartPhone market in Brazil and China.  This doesn't come as a surprise to veteran Dell-watchers as the company provided a "sneak peek" at a mobile device at a technology event in China last August.  Dell's SmartPhone entry will be based on Google's Android software platform, so in all probability it will probably be somewhat similar to Motorola's recently introduced Droid. The initial reaction to the Droid has been very positive.   Dell will partner with China Mobile to enter the China market and many who hold long positions in Dell are drooling over the prospect of Dell tapping into China Mobile's subscriber base of over 500 million users.  In Brazil, Dell will partner with Claro, which has a subscriber base of 42 million customers.  But once again, these expansion plans will cut into Dell's available cash, which worries some analysts.

If you're long Dell shares, you'll be interested in what Dell has to say about the impact they see these moves having on future growth.  If you're looking at short-term price moves, there are a few things to keep in mind.  First, if you believe in technical analysis, Dell's share price moved above both its 20 day and 50 day moving averages of 15.10 and 15.52.  Dell closed below the 50 day moving average on Friday at 15.40.  Analysts are a bit lukewarm towards Dell right now with only 12 out of 20 rating Dell a buy.  If Dell beats handily, and more importantly, if their growth forecast is healthier than anticipated, there's plenty of room for analyst upgrades.  On a somewhat troubling note, some experts feel Dell will have to do more than beat the consensus estimate to move the stock price.  Their "high" estimate is .29 and -- perhaps because of the Perot acquisition and their entry into the SmartPhone market -- the whisper numbers floating around are as high as .31.  So if it's true that some high analysts are "whispering" to the big money players that Dell could beat by that much, if they don't, things could get ugly.  Stay tuned.  This should be interesting!

No positions in securities mentioned in this article.