Dell can’t dent HP’s lead

This just in from Fortune’s Scott Moritz:

The latest earnings report from Dell (DELL) suggests founder Michael Dell hasn’t restored the magic to the PC giant. The Round Rock, Texas, computer maker missed fourth-quarter earnings estimates by a penny after the market closed Thursday, on slightly weaker-than expected sales. The less-than-fantastic performance underscores Dell’s struggle against top PC shop Hewlett-Packard (HPQ).

Dell has been attempting to shift its business model from a light inventory online sales stream to a more conventional retail outlet approach. But the problem is, says one investor who is short Dell’s stock, is that “they are taking on the king of the sales channel, and their costs and capabilities are out of whack.”

Adjusting for one-time items, Dell posted earnings of 35 cents a share, up from 30 cents a year ago but not quite enough to meet the analysts’ estimates of 36 cents. Sales in the fourth quarter were $15.9 billion, up from $15.6 billion in the third quarter and above the $14.4 billion level last year. Analysts were looking for $16 billion.

Analysts point to Dell’s modest product growth rates as a sign that the company isn’t swiping much market share from the competition. PC sales grew 11% in the quarter and notebook sales were up 13%. While that’s respectable, there is still a wide disparity between those numbers and H-P’s 50% notebook growth rate.

Gross margins, the take of revenue left after covering the cost of sales, actually widened to 18.8% from 18.5% in the third quarter, due largely to the cheaper costs of supplies like memory and chips. That break on expenses was expected to provide Dell with a little tailwind as it sailed through the quarter. But so far Michael Dell’s strategy to push into big retail stores like Wal-Mart (WMT), Staples (SPLS) and Best Buy (BBY) hasn’t fired up as much revenue growth as Wall Street had hoped.

Dell shares fell 80 cents, or 4%, to $20.07 in after-hours trading.