Dell hopes its new XPS line will get people to buy more expensive computers.

NEW YORK (CNN/Money) - Has the once-almighty Dell lost its mojo? Increasing numbers of analysts and investors think the answer is yes.

"We think Dell has been too focused on perfecting its existing model instead of adapting it to a changing environment," said Cindy Shaw, an analyst with Moors & Cabot Capital Markets. "What was working for them before is no longer working."

Last week, at least four sell-side analysts downgraded the stock, after the Round Rock, Texas-based computer maker warned that its earnings and revenues would fall short of an earlier forecast because of weaker-than-expected sales in its U.S. and U.K. consumer businesses.

In its warning, Dell also said it would take a charge of about $450 million in the third quarter, largely related to the repair of some computer systems.

Dell will report its third-quarter earnings tomorrow. Analyst are expecting revenues of $13.96 billion and earnings per share of $0.39, according to a Thomson FirstCall survey of analysts.

But analysts and investors will pay particularly close attention to Dell's forecast for the current quarter. Wall Street analysts are expecting revenues of about $15 billion and earnings per share of $0.42 for the current quarter, according to Thomson.

They'll also likely press Dell on what other factors may have accounted for the earnings warning.

While Dell has made few major changes to its model over the last five years, its competitors, including HP, Lenovo, Acer and Gateway have become more competitive and have narrowed the gap between their prices and Dell's, wrote Moors & Cabot's Shaw in a recent research note.

Jess Blackburn, a spokesperson for Dell, said that the company remains constant in its business model and considers it to be one of Dell's major competitive advantages.

"Are we in a constant state of refinement? Absolutely," he said. "We are always doing things to increase the efficiency of our business model. But I wouldn't look for us to have any major changes in our business model."

Shaw also believes that pricing and customer satisfaction, two factors that have given Dell a competitive edge in the past, are not what they used to be.

"Surveys show customer satisfaction with Dell's service and support has fallen, and our industry sources and Web shopping indicate Dell's price advantage has narrowed and in some cases been eliminated," she wrote in the note.

One major area of concern is how falling PC prices have affected Dell's revenues. In the second quarter, Dell missed revenue expectations and delivered lower-than-expected guidance, partially because sales were lower than expected in the government sector, but also because the company pushed pricing for low-end products too aggressively, trying to keep up with competitors.

The company launched a more expensive -- and higher margin -- line of computers, the XPS line, in the third quarter. Shaw said it remains to be seen whether this will boost Dell's PC business.

"Back in the 1990s, if you wanted to build a high-end system for gaming you'd go to Dell because you could get it built to order. But now there are companies that specifically make systems for gaming."

Bill Fearnley Jr., an analyst at FTN Midwest Securities, just downgraded Dell from "buy" to "neutral," citing ongoing concerns about how falling PC prices are affecting PC revenues growth and also concerns about increased competition from Hewlett-Packard and other competitors in its enterprise hardware business.

In a research note to clients, Fearnley noted that the company's pre-announcement on its third-quarter results seemed to bear out his concerns about PC pricing, an issue that caused Dell to deliver lower-than-expected second-quarter results and disappointing third-quarter guidance. The pre-announcement showed that Dell would fail to meet guidance that was tepid by Wall Street standards.

"We remain concerned that continued declines in PC pricing will continue to make PC revenue growth harder for Dell," Fearnley wrote. "We are lowering our PC growth estimates... We also expect Dell to face tougher competition in the enterprise hardware and services segments."

Fearnley added that his firm's independent market research suggests that many customers that want Dell's server hardware are also considering other manufacturers for services and support.

Moors & Cabot's Shaw wrote in a separate research note that she finds the drop-off in server market share based on revenue to be disturbing, given that servers are a higher-margin area business for Dell than the PC division.

"Dell's server market share based on revenue has been flat," said Shaw, adding that IBM's share has been growing. "It's revenue that drives earnings. When your prices are declining faster than competitors' prices, it's hard to grow your earnings as fast."

But not everyone is forecasting doom for Dell.

"In our view, Dell is pretty much the same company and we believe most have forgotten about its structural and cost advantages with its world-class supply chain and direct model," wrote Shaw Wu, an analyst with American Technology Research, in a recent research note, adding that he feels investor sentiment has swung from overly bullish to overly negative, making now a good time to buy shares of Dell.

"While investing in Dell shares now might not offer instant gratification, we believe investors with a longer-term horizon of 6-12 months will be rewarded."

Shares of Dell closed yesterday at $29.09.

None of the analysts quoted in this story own shares of Dell, and their firms do not have banking ties to the company.

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