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Key Takeaways
- Dell and HP together control more than 50% of the PC market in the United States at a given time.
- Both stocks have experienced significant volatility over the past year.
- Investors need to look at a company’s financial statements and strategy to decide if you want to add either stock to your portfolio.
Dell and HP are two of the largest computer manufacturers operating today. In April of this year, Dell held the lead in PC market share, controlling 27.2% of the market. HP experienced some losses but still holds roughly 23% of the PC market in the United States.
If you’re interested in investing in computer manufacturers, both HP and Dell might catch your eye. Here’s what investors need to know to begin assessing these stocks.
A brief history of Dell
Dell was founded in 1984 by Michael Dell and got its start by selling PCs built from stock components directly to consumers. Dell dropped out of college to focus on the business and the company produced the first computer it designed in 1985.
The company expanded quickly through the 1990s, especially as the internet gained popularity and more sales came through the company’s website. It gained market share and became the largest United States PC manufacturer in 1999.
In the wake of the dot-com bubble, the mid-2000s saw a slowdown for the company, with its stock value declining significantly. It began losing market share to competitors who sold through specialized retailers rather than direct to consumers.
The company went private in 2013 as part of a buyout by Michael Dell. It went public again in 2018 and saw strong financial performance, reporting $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 graduates with electrical engineering degrees. Its first product was an audio oscillator. It sold some units to Walt Disney Studios for use in the film Fantasia.
In the 1960s, HP helped establish Silicon Valley and as the company began developing semiconductors. HP entered the computer market in 1966. Through the 1970s, HP focused on the business, scientific and industrial markets. During this time, Steve Wozniak, co-founder of Apple, worked for the company and offered HP right of first refusal to his design for what would become the Apple I. HP declined.
1984 saw the first HP printers and scanners. The 1990s brought an expansion of HP’s line of computers to include sales to consumers rather than industries and universities.
Throughout the 2000s, HP continued to expand its line of products, adding desktops, workstations, and laptop computers. This expanded its market share in personal computing.
How these stocks compare
Given that both HP and Dell combine to control more than 50% of the PC industry in the US, it’s no secret that they’re big big players. If you bought a computer recently, you probably considered a model or two from each of these brands.
Here are the numbers:
Revenue
For the quarter ending July 29th, Dell reported total revenue of $26.425 billion. That number is a slight increase over the previous quarter’s $26.116 billion.
HP, on the other hand, reported revenue of $14.664 billion compared to $16.490 billion in the previous quarter. That’s a drop of more than 11%, which could indicate potential issues for the company despite its significant market share.
Given that Dell’s revenue is growing and is notably higher than HP’s, Dell is the clear winner in this category.
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Net Income
Net income measures how much cash a business has left over after paying all its expenses.
For the quarter ending July 29th, Dell’s net income was $506 million. That is a drop from the previous quarter’s $1.069 billion but an improvement over the quarter that ended in January, which saw a net income loss of $29 million.
HP’s net income for the quarter ending in July was $1.119 billion, an increase over the previous quarter’s $1 billion.
Despite decreasing revenue, HP was able to generate a greater net income which is a good sign for the future of the company.
Assets and Liabilities
For the quarter ending on July 29th, Dell reported overall assets of $88.775 billion and liabilities of $91.530 billion. This puts its net assets minus liabilities at -$2.755 billion.
Dell’s assets and liabilities have significantly shrunk since Q3 of last year when they sat at $135.677 billion and $121.483 billion respectively. However, the fact that assets have decreased more quickly than liabilities is a concern.
HP also had a negative result in net assets. In the most recent quarter ending in July, its total assets were $39.247 billion against liabilities of $41.565 billion for an overall -$2.318 billion.
Unlike Dell, HPs assets and liabilities have increased over the past year, with most of the liability increases coming in the form of debt. This might be a sign of a business borrowing money in an attempt to expand.
Dividends
Dell’s dividend is $0.33 per quarter, which results in a dividend yield of 3.91%. HP pays $0.25 per quarter for a yield of 4.04%.
Investors looking to produce income from their portfolio will likely be happy with either stock’s dividend yield.
Outlook
Much of investing involves trying to predict the future. Will Dell or HP outperform the market going forward and see growing stock prices, or will they fare poorly?
Both companies are dominant in the PC industry, controlling over 50% of the market share in the United States. That information can help investors remain confident that neither business will be disappearing any time soon.
While HP has experienced some losses in market share recently, many of its financials look strong. Dell also seems to be well-positioned despite market volatility, so you’ll need to decide for yourself whether buying either company is the right move for you.
Bottom Line
Dell and HP are two of the largest PC manufacturers out there, so you might consider adding their stocks to your portfolio, especially if you feel that tech companies – who are quick to respond to the market, boasting strong profit margins – will lead the recovery.
If you’re struggling to decide whether either company is right for you, consider working with an app like Q.ai. Our artificial intelligence scours the markets for the best investments for all manner of risk tolerances and economic situations. Then, it bundles them up in handy Investment Kits like the Tech Rally Kit that make investing simple.
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