Analysts polled by Thomson Reuters gave gloomy forecast for Dell’s first quarter which ended at the end of April, expecting a 21.1 percent drop in sales compared to a year earlier.

An average of 26 analysts surveyed by Thompson Reuters forecasted Dell’s first-quarter sales at $12.68 billion, a 21.1 percent drop from the same quarter in 2008. Earnings per share are estimated to be around $0.23, a 32 percent drop from the $0.34 EPS of Q1 2008.

Dell has been on a rebound since the return of founder Michael Dell as CEO, but its growth has stalled with the economy, and its stock has dropped almost 50 percent in the past year.

Dell has been losing market share in the PC industry to Hewlett-Packard and Asia-based Lenovo and Acer. HP, which has much in common with Dell, at least partially solved its reliance on hardware by expanding into the IT services business. With the acquisition of EDS, HP’s services division has grown greatly and has strong margins. Dell, however, has not made anywhere near the effort that HP has to diversify away from PC and server sales.

Meanwhile, Dell is being aggressive in its attempts to cut out expenses. It announced in January plans to cut annual expenses by $4 billion within three years, up from its previous plans to reduces expenses by $3 billion within three years. Wall Street has taken notice.

[W]e are picking up that Dell is taking a more active approach in walking away from aggressive pricing and managing its expenses better, Shaw Wu, an analyst with Kaufman Brothers, wrote in a note to investors.