Dell Inc. (DELL): Can Hewlett-Packard Company (HPQ) Capitalize on Microsoft Corporation (MSFT)’s Missteps?

Hewlett-Packard has already realized it needs to move away from the PC market. Its recent quarterly results confirm this, as its software segment was the only segment that grew. Continued competition from mobile caused Hewlett-Packard Company (NYSE:HPQ)’s personal systems to see a decrease in net revenue of 11% year over year. With a profit margin of -2.8% and a return on investment of -30.9%, Hewlett-Packard Company (NYSE:HPQ) needs time to heal itself. Over the next five years, expect its enterprise and software divisions to grow enough to stabilize its earnings as the company markets itself as a trusted adviser.

Dell Inc. (NASDAQ:DELL) is in the middle of a takeover war between its founder and activist investors. A judge recently hurt Carl Icahn’s attempt to derail the Sept. 12 shareholder vote on Michael Dell’s takeover bid. Dell is profitable, with a profit margin 2.4%. It has an ROI of 12.6%, and a manageable total debt-to-equity ratio of 0.67. But for the majority of investors, it is best to sit on the sidelines. The company’s stock price is being driven by news and rumor, not fundamentals.

MSFT Operating Income TTM Chart

MSFT Operating Income TTM data by YCharts

Conclusion

Between Microsoft Corporation (NASDAQ:MSFT), Hewlett-Packard Company (NYSE:HPQ), and Dell Inc. (NASDAQ:DELL), HP is one company to keep your eye on. Its operating income is stabilizing, and in the long run it may be able to benefit from Microsoft’s difficulties. HP could offer consulting services and help customers choose which version of Linux is best for their needs, differentiating it from basic hardware resellers.

Microsoft’s operating income is slowly coming back from its 2012 dip, but its future is looking grim. Germany’s recent security announcement could scare away large customers from Windows altogether. Microsoft is a value play to keep your eye on, but it is best to wait and see how Germany’s allegations will impact enterprise sales. Dell Inc. (NASDAQ:DELL) is too volatile and news-driven.

The article Can Hewlett-Packard Capitalize on Microsoft’s Missteps? originally appeared on Fool.com and is written by Joshua Bondy.

Joshua Bondy has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft.

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