PREVIEW-HP results offer crucial snapshot of IT demand

* Investors seek hints of improved corporate demand

* Track record of matching or beating Street forecasts

By Gabriel Madway

SAN FRANCISCO, Aug 14 (Reuters) - Hewlett-Packard (HPQ.N) kicks off earnings from global PC makers next week and might show hints of returning consumer demand, but investors will be watching for a revival in corporate spending.

The world's top computer maker and IT services giant reports on Tuesday. The pivotal question is whether business spending, which tanked during the recession, can sustain a slow recovery in the IT and electronics sector

HP's array of hardware, services and software businesses, along with belt tightening, helped insulate it somewhat during the downturn. The company also has a track record of topping or at least matching Wall Street profit forecasts.

HP rival IBM (IBM.N) posted a better-than-expected profit last month and raised its full-year earnings forecast, offering a measure of optimism about IT spending. [ID:nN16369660]

HP is the No. 1 PC maker, ahead of Dell (DELL.O) and Acer (2353.TW), and the second-largest tech services company behind IBM. It ties with Big Blue for the top spot in servers, according to research company IDC.

Dell will provide its snapshot of enterprise demand when it reports results the following week. The No. 2 PC maker and No. 3 server company has felt the brunt of the recession much more acutely than its larger rivals.

Neither HP or Dell has had much positive to say about the business climate of late. Dell said last month that business demand remained very weak.

And in HP's last quarterly report in May, Chief Executive Mark Hurd pointed to pockets of improvement, but said "it's roughly going to be the same" for the rest of the year.

The company affirmed its full-year profit forecast but tempered its revenue outlook.

HP VS DELL

HP is less exposed to the slumping PC market than Dell. Services made up the largest chunk of HP's revenue last quarter after it bought EDS last year. HP continues to digest the company, cutting staff and costs, and analysts expect continued improvement in operating margins in the services segment.

Still, HP's PC business has performed well. It grew 3.6 percent on a unit basis in the calendar second quarter, even as the market contracted 3.1 percent, according to IDC.

Dell's unit shipments slid 17 percent in the April-June period, and the company continues to feel pressure from fast-rising Acer.

Analysts expect HP's net profit in the July quarter to fall 12 percent and revenue to dip roughly 3 percent, according to Reuters Estimates. Wall Street forecast a profit excluding items of 89 cents a share on revenue of $27.2 billion.

In contrast, Dell's net profit is expected to fall 35 percent on a sales decline of 24 percent. Wall Street is looking for earnings excluding items of 23 cents a share on revenue of $12.5 billion.

Both companies' shares have surged this year along with the broader tech sector. HP's stock is up more than 20 percent, with Dell's up more than 30 percent. HP's shares trade at close to 12 times forward earnings, while Dell trades at 14 times.

Recent comments from IBM, EMC (EMC.N) and networking company Cisco Systems (CSCO.O) hinted at stabilization, and investors will hope that HP echoes that sentiment, said Stifel Nicolaus analyst Aaron Rakers.

"I would hope that we hear a little bit more positive commentary around what they're seeing," he said.

Wall Street will watch for improvement in HP's imaging and printing business, where supplies revenue, thought to be relatively resilient, fell 14 percent last quarter, he added.

JP Morgan analyst Mark Moskowitz expects HP's PC and services segments to outperform expectations and he expects the company to beat Wall Street estimates. But he also sees "choppy" performance from printers and servers.

"For long-term investors, we believe that HP offers the blend of enterprise and consumer exposure to be a relatively early beneficiary of any macro-driven replacement cycle," Moskowitz wrote in a research note. (Reporting by Gabriel Madway. Editing by Edwin Chan and Robert MacMillan)