NEW YORK (CNN/Money) -
It won't be a surprise to Wall Street if Dell reports incredibly strong fiscal fourth quarter results on Thursday.
Analysts expect Dell to report earnings of 28 cents a share in its fourth quarter, which ended in January. That's a 23 percent jump from the fourth quarter of 2002. Sales are forecast at $11.5 billion, 18 percent higher than a year ago.
But shares of Dell (DELL: Research, Estimates) have been relatively flat since the company posted solid fiscal third quarter results in November. It seems that the stock is in a holding pattern as Wall Street waits to see what the personal computer company's guidance for the first quarter will be.
If Dell indicates that it expects sales to increase from the fiscal fourth quarter, then that could be further proof that demand for tech is really back in a big way. The current consensus estimate is for $11.2 billion in sales in the fiscal first quarter, a nearly 3 percent drop from the fourth quarter.
Will Wall Street freak out if Dell doesn't give guidance for sequential growth? After all, several other tech giants, including Intel and Cisco Systems, were punished for giving what investors felt were uninspiring first quarter forecasts.
Will Dell buck seasonal trends?
In some respects, it's unfair to expect Dell, or other large tech companies for that matter, to report an increase in sales from the fourth quarter. That quarter is typically the strongest for techs, thanks to strong consumer spending around the holidays and a so-called "budget flush" from corporations looking to make purchases before the end of the year.
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But Dell bucked seasonal trends during the last tech boom. In the first fiscal quarter of 1999 (which ended in April 1998), Dell posted a sequential sales increase of 5 percent from the fourth quarter of fiscal 1998. And in the first fiscal quarters of 2000 and 2001, Dell posted sequential sales gains of 7 percent.
So some tech fans might be hoping for the company to return to this trend after posting a sequential sales decline of 7 percent in the first quarter fiscal 2002, flat growth in the first quarter of fiscal 2003 and a decline of 2 percent in last year's fiscal first quarter.
That may be an unreasonable hope, though. Todd Campbell, an analyst with E.B. Capital Markets, an independent research firm, said that Dell is a much larger company now than it was four or five years ago. And as it continues to grow, it will be tougher for Dell to post sequential growth in the typically weak first quarter, he argues.
Of course, that message seems to be falling on deaf ears with investors. "Everyone is building in a perfect world growth story," said Campbell. "But investors may be overly optimistic about the first quarter."
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Dell should benefit from the pickup in corporate tech spending, which companies like IBM, Intel, Microsoft and Cisco have talked about when they released their latest quarterly results. In addition to computers, Dell also sells servers and storage to large businesses.
The company also has boosted its presence in the consumer electronics arena as well. Dell began selling flat-screen TVs late last year.
But Dell is facing some tougher challenges in its flagship PC business. According to IDC, a tech research firm, Hewlett-Packard (HPQ: Research, Estimates) re-took the global market share lead from Dell in the fourth quarter. The intense competition between these two rivals has sparked some fears about how a PC price war could affect profit margins.
And Gateway (GTW: Research, Estimates), which some tech observers thought would look to scale back its efforts in the PC business this year, has recently shown that it's not ready to back out of the PC fray. The company announced last month that it was acquiring eMachines, a leading manufacturer of low-end computers.
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