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Dell's Not Dead Yet Despite PC Space Slowdown

Tickers in this article: DELL IBM MSFT HPQ AAPL

NEW YORK ( TheStreet) -- The PC space is slowing, as Apple(AAPL) continues to attract consumers to its Mac computers, and smartphones and tablets grow at warp speed. Dell(DELL) investors will be hoping that trend starts to turn around.

Wells Fargo analyst Maynard Um noted the continued weakness in the PC market, though believes the recent Windows 8 launch by Microsoft(MSFT) could help strengthen demand. He rated Dell market perform with a price target of $10 to $11.

Dell has had a rough go of it in recent quarters, as the PC becomes less relevant in both the consumer and enterprise segments. Dell is not alone, with HP(HPQ) being subjected to the same fate. According to IDC, Dell lost 0.75% of market share year over year as of the September quarter. China is stemming some of that decline, but not enough to stop Dell's worries.

Although Dell is trying to turn itself into a services and software company similar to IBM(IBM) , Dell is still heavily reliant on PC sales for a hefty percentage of revenue. Wells Fargo's Um noted that PCs may account for as much as 48% of third-quarter revenue. As the PC market continues to degrade, having nearly half of quarterly revenue continues to drag on Dell's share price.

Dell shares have fallen 34.52% so far in 2012. HP has fared even worse, off 49%, while Apple has gained 32.56% this year.

With expectations and the bar set extraordinarily low, Sterne Agee analyst Shaw Wu said he thinks Dell could rally near-term, as results may be better than anticipated.

"However, given low expectations, we expect results to be in-line or better. For its outlook, it is a similar story with low expectations. Because of this, we would not be surprised to see a near-term rally in DELL shares though our longer-term concerns remain," Wu wrote in a note. He rated Dell shares neutral.

Analysts polled by Thomson Reuters expect the Round Rock, Texas-based company to earn 40 cents a share on $13.89 billion in revenue.

The PC market might be slowing and becoming less relevant as smartphones and tablets continue to meet our technological needs. Raymond James analyst Brian Alexander believes the PC isn't dead, and Dell could surprise from an uptick in demand.

"We maintain our Strong Buy rating, however, as we believe that growth could surprise to the upside in a more normalized environment, as the company leverages its enhance enterprise capabilities, increased technical resources and expanded channel presence," Alexander wrote.

Dell investors can only hope.

Interested in more on Dell? See TheStreet Ratings' report card for this stock .

--Written by Chris Ciaccia in New York

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