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HP Gains Ground As Dell's Woes Continue

Dell still ships more PCs than anyone on earth, but the one-time industry darling looks to be trading places with former industry whipping boy Hewlett-Packard.

HP brought on nuts-and-bolts CEO Mark Hurd to replace the more flamboyant Carly Fiorina early last year and began a restructuring that included extensive layoffs. Last week, Hurd expressed pleasure with "another solid quarter," while Dell grappled with continued earnings declines. Chairman Michael Dell announced a "full examination of all procurement and supply chain practices."

If what Dell CEO Kevin Rollins called a "clearly disappointing" quarter weren't bad enough, the company is fighting to protect its hard-won reputation as it recalls 4.1 million laptop batteries after scattered reports of the devices bursting into flames (see story, "Dell Customers Have To Wait Four Weeks For Replacement Batteries"). Dell CFO James Schneider also revealed last week that the Securities and Exchange Commission began an "informal" investigation of the company in August 2005. The inquiry involves potential accounting irregularities before 2006, but Dell says it doesn't expect the outcome of the investigation to significantly impact its financials.

Dell reported that second-quarter sales rose 5% compared with the year-earlier quarter, to $14.1 billion. But the results marked the company's second consecutive quarter-to-quarter decline in sales and profits. Dell blamed a year-over-year 51% quarterly profit decline, to $502 million, on an overly aggressive pricing strategy.

Dell hopes to reverse the slide with a shift from its long-held Intel-only policy. Dell previously unveiled plans to begin selling a four-socket Advanced Micro Devices Opteron-based server by year's end. Last week, it announced further plans to introduce AMD processor-based Dimension desktop PCs in September and two-socket Opteron-based servers before 2007.

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