HP scandal: Finally some good news for Dell

chart_hp_vs_dell.top.gif By David Goldman, staff writer


NEW YORK (CNNMoney.com) -- If there's one person who's glad to see Hewlett-Packard CEO Mark Hurd go, it's Michael Dell. Since Hurd took over HP in April 2005, it's been a vastly different story for the two tech giants.

Dell's past five years have been plagued by legal woes, complaints about poor customer service and a lack of preparation for the new competitive landscape. Shares of Dell (DELL, Fortune 500) are trading at just $13, a third of the $38 price they traded at the day Hurd took HP's reins.

Meanwhile, HP (HPQ, Fortune 500) not only jumped ahead of Dell in the personal computer market, it also is now the largest tech company by total revenue. Its stock more than doubled during Hurd's tenure.

But now that Hurd is gone, can Dell capitalize on the fact that its key competitor is in turmoil? Not so fast. Mark Margevicius, an analyst at tech research firm Gartner, said Dell has to "fix its own business first."

Dell has a lot of work to do. Dell came in dead last in consumers' rankings of computer manufacturers early this year, according to Forrester Research.

It's not just customer service in which HP has bested Dell: Margevicius said HP has surpassed its rival in managing its supply chain, improving its network of vendors, and offering a more diversified portfolio of PCs.

That last point is perhaps the most crucial. If there was one thing that really got Dell into trouble over the past several years, it was the company's inability to capitalize on soaring consumer demand for laptops and netbooks.

Dell's business is heavily reliant on corporations buying desktop PCs, but the deadly combination of Microsoft's (MSFT, Fortune 500) Windows Vista debacle and the recession slowed those enterprise sales to a crawl. Unlike Dell, HP offered a wide array of consumer PCs and customers could go to any computer retailer to pick one up.

But that trend appears to be shifting: An improving economic climate and positive reviews of Windows 7 have led many corporations to start replacing their old PCs.

That shift should ultimately benefit Dell and may hurt HP. In fact, the PC market share gap between Dell and HP has already narrowed over the past several quarters.

Kevin Hunt, an analyst who covers Dell stock for Hapoalim Securities, pointed out that there was little Hurd could have done to reverse that trend if he stayed, but added that Dell may be able to grab more share due to the turmoil at HP.

That could help lift sales, profits and Dell's lagging share price.

"Certainly from a stock perspective, Dell looks much more interesting than HP now that Hurd's gone," Hunt said.

Still, others caution investors not to exaggerate the impact of Hurd's departure or to underestimate the abilities of the strong supporting staff at HP.

Todd Bradley, who has been the head of the PC division at HP for the past three years, has quickly emerged as one of the leading candidates to replace Hurd.

HP has sold 52 million more PCs than Dell during Bradley's tenure, according to Gartner. So Dell can't be too happy to hear Bradley's named mentioned as a possible replacement.

"I don't see much upside for Dell because of this," said Michael Holt, an analyst at Morningstar. "People are concerned about HP's server and services businesses, but with the PC business, HP still has a strong leader in Todd Bradley."  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,804.80 26.65 0.15%
Nasdaq 4,765.38 16.98 0.36%
S&P 500 2,070.65 9.42 0.46%
Treasuries 2.18 -0.03 -1.27%
Data as of 4:11am ET
Company Price Change % Change
Bank of America Corp... 17.62 0.09 0.51%
Apple Inc 111.78 -0.87 -0.77%
General Electric Co 25.62 0.48 1.91%
Intel Corp 36.37 -0.65 -1.76%
Microsoft Corp 47.66 0.14 0.29%
Data as of Dec 19

Sections

New York Magazine reporter Jessica Pressler, who has been caught up in controversy this past week, will not be moving on to a new job at Bloomberg News. More

Investors beware: These 5 global crises are likely to rattle the stock market and world economy. More

Forums in dark corners of the web sell the kinds of hacks that befell Sony. More

Unilever sued Hampton Creek over its egg-free mayonnaise spread Just Mayo. But the company behind Best Foods and Hellman's mayonnaise has now dropped the lawsuit. More

The income of the top 1% jumped significantly in 2012, far outpacing inflation. Not only did this group make a larger share of the country's income, their share of total taxes also jumped from 35% to 38%. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.