Key points to remember
- Dell and HP together control more than 50% of the US PC market at any given time.
- Both stocks have experienced significant volatility over the past year.
- Investors should review a company’s financial statements and strategy to decide whether to add either stock to your portfolio.
Dell and HP are two of the largest computer manufacturers in business today. In April of this year, Dell held the lead in PC market share, controlling 27.2% of the market. HP suffered some losses but still has about 23% of the US PC market.
If you want to invest in computer manufacturers, HP and Dell might catch your eye. Here’s what investors need to know to start evaluating these stocks.
A brief history of Dell
Dell was founded in 1984 by Michael Dell and began by selling PCs built from stock components directly to consumers. Dell dropped out of college to focus on business, and the company produced the first computer it designed in 1985.
The company grew rapidly during the 1990s, especially as the Internet grew in popularity and more sales were made through the company’s website. It gained market share and became the largest PC maker in the United States in 1999.
In the wake of the dot-com bubble, the mid-2000s saw a downturn for the company, with its stock values dropping dramatically. It began to lose market share to competitors who sold through specialty retailers rather than directly to consumers.
The company went private in 2013 in a takeover by Michael Dell. It went public again in 2018 and posted strong financial performance, recording $94 billion in sales and $13 billion in operating cash flow in 2020.
A brief history of HP
HP Inc., formerly Hewlett-Packard, was founded in 1939 by Bill Hewlett and David Packard (yes, yes, in a garage), both Stanford electrical engineering graduates. His first product was an audio oscillator. He sold some units to Walt Disney Studios for use in the movie Fancy.
In the 1960s, HP helped establish Silicon Valley, and as the company began to develop semiconductors. HP entered the computer market in 1966. During the 1970s, HP focused on commercial, scientific, and industrial markets. Meanwhile, Apple co-founder Steve Wozniak worked for the company and offered HP the right of first refusal on his design for what would become the Apple i. HP refused.
1984 saw the first HP printers and scanners. The 1990s saw the expansion of HP’s computer line to include sales to consumers rather than industries and universities.
Throughout the 2000s, HP continued to expand its product line, adding desktops, workstations, and notebooks. This expanded its market share in personal computing.
How these stocks compare
Since HP and Dell combine to control more than 50% of the PC industry in the United States, it’s no secret that they are big players. If you’ve purchased a computer recently, you’ve probably considered a model or two from each of these brands.
Here are the numbers:
For the quarter ending July 29, Dell reported total revenue of $26.425 billion. This number is a slight increase from the $26.116 billion in the previous quarter.
HP, on the other hand, posted revenue of $14.664 billion, up from $16.490 billion in the previous quarter. That’s a drop of more than 11%, which could indicate potential problems for the company despite its large market share.
Since Dell’s revenue is growing and is significantly higher than HP’s, Dell is the clear winner in this category.
Net income measures how much money a business has left after paying all of its expenses.
For the quarter ending July 29, Dell’s net profit was $506 million. That’s down from the previous quarter of $1.069 billion, but an improvement from the quarter that ended in January, which saw a net income loss of $29 million.
HP’s net profit for the quarter ending July was $1.119 billion, up from $1 billion in the prior quarter.
Despite the drop in revenue, HP was able to generate a higher net income, which is a good sign for the future of the company.
Assets and liabilities
For the quarter ending July 29, Dell reported aggregate assets of $88.775 billion and liabilities of $91.530 billion. This puts its net assets minus its liabilities at -$2.755 billion.
Dell’s assets and liabilities have fallen significantly since the third quarter of last year, when they stood at $135.677 billion and $121.483 billion, respectively. However, the fact that assets have shrunk faster than liabilities is concerning.
HP also had a negative net asset result. During the last quarter ending in July, its total assets were $39.247 billion against liabilities of $41.565 billion for a total of -$2.318 billion.
Unlike Dell, HP’s assets and liabilities have grown over the past year, with most increases in liabilities taking the form of debt. It could be a sign that a business is borrowing money in an attempt to expand.
Dell’s dividend is $0.33 per quarter, which translates to a dividend yield of 3.91%. HP pays $0.25 per quarter for a yield of 4.04%.
Investors looking to generate income from their portfolio will likely be pleased with the dividend yield of either stock.
A big part of investing is trying to predict the future. Will Dell or HP outperform the market going forward and see stock prices rise, or will they fare poorly?
Both companies are dominant in the PC industry, controlling more than 50% of the market share in the United States. This information can help investors stay confident that neither company is going out of business anytime soon.
Although HP has recently lost market share, many of its finances appear solid. Dell also appears to be well positioned despite market volatility, so you’ll have to decide for yourself if buying either company is the right move for you.
Dell and HP are two of the biggest PC makers, so you might want to consider adding their stocks to your portfolio, especially if you think the tech companies – which are quick to react to the market, with strong profit margins – will lead the recovery. .
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