Dell Inc will on Thursday report quarterly results for the first time as the No. 3 maker of personal computers -- unfamiliar territory for a company that not so long ago was the world's largest PC maker.

In the midst of a push to diversify and become less dependent on PCs, Dell has stressed profitability over growth, stayed clear of price wars and cut expenses as it tries to push into higher margin businesses such at technology services.

The company, which is heavily reliant on corporate customers, has seen revenue fall 23 percent over its first two fiscal quarters, as Taiwanese upstart Acer Inc supplanted it as the No. 2 PC vendor.

Acer made gains mainly by selling netbooks and low-cost notebook PCs to consumers. But analysts say Dell should stand to benefit next year, as businesses upgrade 4- and 5-year-old PCs and other hardware -- especially with Microsoft Corp's Windows 7 operating system on the market.

That's the swing factor: how does this corporate refresh play out next year? said Hapoalim Securities analyst Kevin Hunt. Dell should be a beneficiary.

Calyon Securities analyst Steven Fox said he does not think Dell's share price has factored in the PC refresh cycle because investors are still unsure about its pace and strength.

Fox said Wall Street may be concerned if Dell's PC market share losses continue, but he added that it was not the ultimate measure of the company's health.

From an investors' standpoint, if they are growing profitably we shouldn't care as much about absolute market share, he said.

Wall Street is expecting fiscal third-quarter earnings of 28 cents a share on revenue of $13.2 billion, according to Thomson Reuters I/B/E/S. That compares with EPS of 37 cents on revenue of $15.2 billion in the same period last year.

Analysts will also be watching Dell's margin to track the progress of its multibillion dollar cost reduction effort. Analysts expect a gross margin of 18.2 percent versus 18.8 percent last year.

The median price target on Dell's stock is $17, or 6.6 percent above its Tuesday closing price of $15.95.

Dell trades at around 15 times estimated forward earnings, compared to about 12 times for larger rival Hewlett-Packard Co. Dell shares have gained around 50 percent this year, while HP's are up roughly 40 percent


After months of speculation, Dell purchased Perot Systems Inc for $3.9 billion in the last quarter, greatly expanding the size of its services business. But some analysts believe Dell overpaid and will look for additional insight on the deal.

Last week HP announced a $3 billion deal for 3Com Corp to broaden its product portfolio and better compete with network giant Cisco Systems Inc.

HP, the No. 1 PC maker and the world's largest supplier of technology products, last week reported preliminary fiscal fourth-quarter results that beat Street forecasts.

It also raised its fiscal 2010 outlook, but provided scant details, saying only that the quarter was driven by significant growth in China. Analysts will be keen for additional data points and commentary about the business climate when HP issues full results next Monday.

HP and Dell, long-time rivals whose business profiles and fortunes have diverged in recent years, both stand to benefit from a return in enterprise demand for technology hardware.

Dell Chief Executive Michael Dell has been upbeat about 2010, saying he expects a powerful wave of corporate spending on IT equipment.

HP has been helped during lean times by its recurring revenue streams and exposure to the consumer market. It has been taking share in both servers and PCs during the economic downturn, and analysts say the 3Com deal signals that the company plans to fight its rivals on all fronts in the battle for the data center.

(Reporting by Gabriel Madway; Editing by Richard Chang)