February 28 2008: 5:15 PM EST
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Michael Dell not enough to boost Dell

The PC seller is still reshaping its strategy, but it's not easy going up against Hewlett-Packard.

By Scott Moritz, writer

Dell's back, but the company still has a long way to go before it repositions itself as a retailer.

(Fortune) -- Michael Dell has not restored the magic to the PC giant.

The computer maker reported disappointing revenues Thursday, and while Thomson First Call did not provide a definitive number for consensus earnings estimates, clearly many investors were not impressed by the 35 cents per share (adjusted for one-time items) that the company reported. Dell (DELL, Fortune 500) shares fell 80 cents, or 4%, to $20.07 in after-hours trading.

This less-than-fantastic performance underscores Dell's struggle against top PC shop Hewlett-Packard (HPQ, Fortune 500). Dell has been attempting to shift its business model from a light inventory online sales stream to a more conventional retail outlet approach. The problem, says one investor who is short Dell, is "they are taking on the king of the sales channel and their costs and capabilities are out of whack."

Adjusting for one time items, Dell's earnings of 35 cents a share were up from the 30 cent level in the year-ago quarter. Sales in the fourth quarter were $15.9 billion, up from $15.6 billion in the third quarter and above the $14.4 billion level last year. Analysts were looking for $16 billion.

Analysts point to Dell's modest product growth rates as a sign that the company isn't swiping much market share from the competition. PC sales grew 11% in the quarter and notebook sales were up 13%. While respectable there is still a wide disparity from HP's 50% notebook growth rate. Gross margins - the take of revenue left after covering the cost of sales actually widened to 18.8% from 18.5% in the third quarter due, largely to the cheaper costs of supplies like memory and chips.

But that break on expenses was expected to provide Dell with a little tail wind as it sailed through the quarter. Michael Dell's strategy to push into big retail stores like Wal-Mart (WMT, Fortune 500), Staples (SPLS, Fortune 500) and BestBuy hasn't exactly fired up revenue growth as much as Wall Street had hoped.  To top of page