In case you missed it, The Wall Street Journal had a couple pieces on the gadget wars this morning: A report by Stuart Weinberg says that Research in Motion (RIMM) is on track to sell half a million units of the PlayBook tablet computer in the quarter ending this month, a feat Weinberg calls, “A respectable entrance into the competitive tablet market.”

(I should note BoyGeniusReport’s Jonathan Geller on Friday wrote that the PlayBook’s sales have “fallen far short of expectations,” citing an anonymous source at “a major big box retailer.”)

Also in today’s Journal, Justin Scheck and Ben Worthen chronicle Dell’s (DELL) failed bid to offer consumer electronics, having “pulled the plug” on initiatives such as a music player and an online music store. “Apple-like success hasn’t followed” Dell’s purchase of Zing, a software maker that was supposed to kick-start Dell’s music efforts, the authors write.

The sidebar to that piece is an autopsy of the failure of Dell’s first tablet computer, the $500 “Streak” that was roundly panned when it appeared last year. Scheck and Worthen write that anonymous sources expect Dell may delay a 10-inch version of the Streak, expected this summer, until later in the year because of necessary bug fixes.

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Small-cap ($367 million) patent holder Mosaid Technologies, which is based in Kanata, Ontario, in Canada, this afternoon fired the latest salvo in an ongoing patent battle with Cisco Systems (CSCO), complaining to the U.S. International Trade Commission that Cisco infringed six of its patents on networking technology, including power-over-ethernet, DSL access points, and voice technology for cable modems.

Mosaid, whose shares trade on the Toronto stock exchange under the symbol “MSD,” requested that the ITC halt import of Cisco products to the U.S.

Last August, Mosaid said that Cisco had requested a declaratory judgment of non-infringement of its products in light of nine U.S. patents held by Mosaid and requested a jury trial. Mosaid, beginning in October of 2009, had sent notice to Cisco saying the company infringed some of Mosaid’s 300 patents on various networking technologies, and demanded  Cisco pay for a license.

Mosaid is also suing chip maker Nvidia (NVDA) in the Disctrict Court for the Eastern District of Texas, Tyler Division, accusing the company last month of infringing its patents on power management in integrated circuits. It sued Japanese memory chip maker Elpida Memory in the same jurisdiction a week ago, charging the company infringes its patent on “field effect transistors,” or FETs.

And Mosaid also has a mammoth suit down in Texas, in the Marshall division, filed in March, against numerous companies, including Intel (INTC), Dell (DELL), Research in Motion (RIMM), chip maker Marvell Technology Group (MRVL), and several others, charging them with infringing on six patents relating to wireless technology, in particular as it pertains to wireless area networking.

Mosaid has had some patent victories of late. In December of last year, it got IBM (IBM) to license its technology applicable to application-specific integrated circuits (ASIC).

The company’s fiscal Q2 report last November featured a 17% jump in revenue on the licensing of wireless patents.

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Shares of Dell (DELL) are up 67 cents, or 4%, at $16.57 this morning, following better-than-expected fiscal Q1 results last night and a reaffirmation of its year outlook.

(I would note that Hewlett-Packard (HPQ) shares continue to trade down this morning, following a raft of downgrades yesterday. The stock is currently off 67 cents, almost 2%, at $36.24.)

No upgrades so far this morning, that I can see, but estimates and price targets are going up all around, but there is still a substantial caution about whether Dell can maintain its operating profit margin, given that it was margin that allowed the company to beat earnings last night even as it missed revenue estimates:

Kevin Hunt, Auriga: Reiterates a Buy rating, and a $25 price target. Hunt raised his full-year EPS estimate to $1.86 from $1.65, leaving essentially unchanged his EPS estimate of $64.7 billion. The question is margin, he suggests, and what to believe: “Dell increased its full year operating income guidance to a range of 12-18% y/y growth from a prior view of 6-12%. While that is impressive growth, it is far short of the 74% y/y growth just posted by Dell in the first quarter, and implies a significant deceleration in margins as the year progresses, with negative profit growth later in the year, at a time when revenue is being guided upward.” Probably just being conservative, says Hunt, but it’s also possible PC pricing gets more “aggressive” this year, or component pricing rises. “So some caution does appear prudent.”

Ben Reitzes, Barclays Capital: Reiterates an Equal Weight rating on the shares, while raising his price target to $17 from $15. “We continue to believe Dell margins may have peaked,” he writes. Problem is, a wind-down of the corporate PC refresh cycle means Dell “will need to adjust pricing a bit to provide more balance,” given that revenue underwhelming in each segment in the quarter, with desktop revenue down 8% and notebook revenue of $4.7 billion slightly less than expected. Server and networking revenue of $1.97 billion was also light, as was storage revenue and software and peripherals. Services was a bright spot and it “seems like that business is on solid footing.” Reitzes raised his year EPS estimate to $1.90 from $1.70.

Brian Marshall, Gleacher & Co.: Reiterates a Neutral rating, while raising his price target to $16 from $15, though he’s not convinced Dell can maintain its operating margin improvement. “Management’s FY12 operating income guidance is for growth of 12-18% Y/Y. This implies an operating margin outlook of 7.0% at the midpoint of guidance (i.e., a material decline over the next three quarters) […] There must be a decelerating operating margin trajectory (i.e., a 220bp decline from the most recent quarter).” Marshall raised his year EPS estimate to $1.74 from $1.65 previously, on revenue of $63.5 billion, up slightly.

Shaw Wu, Sterne Agee: Reiterates a Neutral rating and a $15 price target, while raising his fiscal year ESP estimate to $2 from a prior $1.70. However, his concerns are not allayed: “we remain concerned with the company’s longer-term fundamental position and believe the company needs to take more aggressive steps to reinvent itself. In our view, the company faces formidable competitors Apple (AAPL), HP, Acer, Toshiba, and Lenovo in its core PC business, and HP, IBM (IBM), Cisco Systems (CSCO), and Oracle (ORCL) in the enterprise business.”

Richard Kugele, Needham & Co.: Reiterates a Hold rating, while raising his year estimate for EPS to $1.88, leaving his revenue more or less unchanged at $64.9 billion. “We believe that to warrant further appreciation in the stock, the street would need to: 1) suspend its negative view on tablets, 2) assume a near-term recovery in the consumer PC market, and 3) believe Dell will be able to maintain or expand margins even in the pending less favorable component environment (all of which we see as unlikely at this time).”

Keith Bachman, BMO Capital Markets: Reiterates a Market Perform rating, while raising his price target to $19 from $18. “Given weak stock price performance by HPQ, and strong stock performance by IBM (IBM), we believe that investors will consider and indeed put some new money to work in Dell,” writes Bachmn, though he’s not convinced there’s enough upside to raise his rating on the shares.

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Auriga Securities analyst Kevin Hunt today took up coverage of computer hardware names, starting off with Buy ratings on Dell (DELL), Seagate (STX), Intevac (IVAC), and Western Digital (WDC), and Hold ratings on EMC (EMC), NetApp (NTAP), and Hewlett-Packard (HPQ).

Hunt joined Auriga recently from Hapoalim Securities, and was for a long time with Thomas Weisel before that.

On Dell versus HP, Hunt argues HP has “headwinds in 80% of its businesses,” including PCs, printers, and services. That’s going to offset the payoff from servers, networking, and storage product sales. He sees the company’s revenue growth being bounded by the overall 3% to 6% range of global IT spending, and perhaps being as little as 2% to 4% over the next three to five years.

Dell will also be constrained in that respect. However, in their case, Dell can continue to improve its operating margin this year, which will help it increase EPS 10% to 15% versus a muted revenue growth outlook. From 4.9% in fiscal 2010 that ended a year-ago January, the company improved that to 8% in Q4 of fiscal 2011 that ended in January. “Our sense is things took a modest seasonal step back in F1Q12, and that the majority of investors still don’t care all that much,” he writes,

“But it does seem very clear to us that Dell has things moving in the right direction, on a steady uptrend, and that the steady OM improvement outcome does not appear to be fully reflected in Dell’s share price due to fears over tablets, etc.” Hunt’s betting Dell can reach a steady-state operating margin of 7.5% this full fiscal year.

Hunt has a $25 price target on Dell and a $46 target on Hewlett-Packard.

Both Western Digital and Seagate should fare better than people expect because the whole tablet-computer-versus-PCs argument is overblown, he thinks. “merger. Yes, tablets are an issue, but even with very modest HDD unit growth going forward, Seagate should be able to deliver expanding margins and very attractive ROIC,” writes Hunt, and the same goes for Western. Given recent consolidation in the drive industry, both Western and Seagate can see expanding margins and profit based on unit growth of 4.6%, compounded annually, over the next 2 years.

He has a $29 price target on Seagate, and a $51 target on Western.

Continued share gains are already priced into EMC’s stock, at 19 times projected 2011 EPS, he thinks. NetApp has top-notch management, but they will be tested like never before with the recent purchase of Engenio. (See RBC’s upgrade yesterday on positive views about the Engenio deal.) The company’s probably not going to have the kind of growth going forward that it had in the past ten years, “partly due to the great success NetApp has had in expanding its business,” implying there’s not as much to gobble up.

Lastly, Intevac, which provides tools to disk drive makers, also has some opportunities in photonics and solar that are underappreciated, he thinks. Although the company has had some stumbles in these emerging areas, Hunt says they could have $3 billion out of a total $10 billion to $12 billion in new addressable markets by 2014. In particular, things such as tools for “traditional silicon based solar processes” could start to yield “substantial revenue” next year. Hunt has an $18 target on the stock.

Today the shares are performing as follows:

Dell is down 8 cents, or half a percent, at $16.65;
HP is down a penny at $41.05;
IVAC is up 56 cents, or 5%, at $11.63;
Western is up 18 cents, half a percent, at $38.62;
Seagate is up 4 cents at $17.47;
EMC is up 22 cents, or 0.8%, at $27.52;
and NetApp is up 66 cents, or 1%, at $54.63.

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Barclays Capital hardware analyst Ben Reitzes today opines that PC makers need to rethink their business, because just taking market share or expanding profit margin through better component pricing will not be enough to improve their stock prices.

He’s really talking about Dell (DELL) and Hewlett-Packard (HPQ), which trade at 9 times and 8 times projected EPS, respectively.

What should they do? Reitzes offers some things to consider, without explicitly endorsing anything:

Shift from Intel (INTC) microprocessors to chips based on ARM Holdings (ARMH) designs. Those chips might cut processor cost by a third, which would save $25 per PC, 5% of the total cost of the machine, and would add 55 cents a share to HP’s annual profit and $0.45 to Dell’s profit, roughly 10% and 20%, respectively, of their total annual profit.

Switch from Windows to Chrome. Microsoft’s (MSFT) software is $75 per desktop and notebook, on average, for the vendor, and $50 for the average consumer PC. Switching to Google’s (GOOG) “Chrome” OS would save $45, 10% of the bill of materials. That would add $1 extra in profit per share per year for HP, and add 80 cents to Dell’s annual EPS.

HP has the added option of expanding its Web OS software to the PC from the smartphones and tablets it has announced, something it hinted at back in February.

Although Microsoft said at the Consumer Electronics Show in January that it will bring the next Windows (presumably version to ARM chips, this is more of a rearguard action on Microsoft’s part, Reitzes argues, a step that was only taken after the company had been “blindsided” by “the impact of the iPad, the ascent of [Apple's (AAPL)] iOS, and Android as de-facto mobile device platforms, and the inability of Intel to produce a low-cost, low-energy consuming processor.”

Hence, Windows on ARM faces issues, he thinks, even if it continues to dominate unit shipments: “There would be some question as to pricing and Microsoft’s ability to still command $50 per Windows license if overall costs of hardware were to come down by the savings of moving to an ARM processor.”

And, drum roll please …. “We believe that Apple will be the first in our sector to embrace ARM for some Macs, as early as C2H12,” writes Reitzes, with a nod to speculation last week Apple may ditch Intel chips for ARM chips.

We believe that Apple is already working hard on the software to accomplish this feat within the MacBook Air line-up. Through its own development of ARM-based processors and ARM-based iOS software, this migration would be rather natural for Apple. Apple is already moving toward enhanced battery life and ultra portability with its current MacBook Air line, which uses NAND instead of HDDs.

And since you’re probably wondering, no, there is no mention in the note of Intel’s momentous announcement last week of its “Tri-Gate” process technology, which even some bears on Intel stock think could give it an edge on ARM-based chips. A curious omission, on Reitze’s part, to be sure.

In any event, for a different perspective on Intel and Apple, see Piper Jaffray’s Gus Richard’s note this morning.

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How fitting, on the day when Research in Motion (RIMM) release their tablet computer, the PlayBook, Goldman Sachs analyst Bill Shope and colleagues released another mammoth report on the future of tablets, clocking in at 68 pages.

Shope and his team argue tablets are “one of the most disruptive forces” ever as far as the traditional PC market, with 60 million units expected to be shipped this year and probably as much as 35% of those unit shipments coming at the expense of traditional PCs, specifically notebook computers. Goldman estimates 21 million more notebooks would be sold this year if not for tablets, and 26.5 million units may be lost in 2012 at the hands of tablet sales.

Apple (AAPL) is expected to hold onto 64% of tablets this year, and that could be higher, at 74%, if, as Shope & Co. predict, there is “downside risk” to Android-based tablet sales.

Even assuming 50% upside to the non-Apple tablet market, it is likely that Apple would still hold a majority market share. In our non-Apple upside scenario, Apple would hold 54% of the market in 2011 and 2012. To the extent that non-Apple tablets sell below our current expectations, our downside analysis implies Apple could hold as much as 74% market share in 2011 and 71% market share in 2012. We believe the downside scenario for Android shipments is more likely at this point.

Naturally, Apple is perceived as one of the winners in the market. Other winners include Broadcom (BRCM), Qualcomm (QCOM), HTC, Synchronoss (SNCS), Motorola Mobility (MMI), Nvidia (NVDA), and ARM Holdings (ARMH). Losers in Goldman’s view include Acer, Dell (DELL), Hewlett-Packard (HPQ), RIM, Intel (INTC) and AMD (AMD).

On RIM’s PlayBook, specifically, the authors write,

However, we see risk to uptake from the time to market advantage achieved by the iPad and the [Motorola] Xoom, which are priced similarly but have superior specs […] RIM’s WiFi-only version will only be available to connect to corporate e-mail, which limits the enterprise use case to the installed base, which is in decline. Longer term, while a better-than-expected reception to the QNX operating system via a tablet could smooth the path for RIM’s QNX smartphone offering expected in 2012, we remain skeptical given mounting competitive pressures. For example, we expect significant uptake of Android tablets as we saw with Android smartphones, where its share increased from 1% in 2008 to 21% in 2010. We also note that RIM’s past two smartphone product refreshes (Storm and Torch) were disappointing.

The authors cite deterioration in PC sales over the last several quarters as evidence of tablet momentum, and they include a nifty graphic to illustrate, pasted below.

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Global PC shipments declined 3.2% during the first quarter of 2011, compared to the same time last year, according to the International Data Corporation (IDC) Worldwide Quarterly PC Tracker.

The decline represented the first contraction in the worldwide PC market since the end of the recent recession, the firm said.

IDC chalked up the drop to a still cautious business mentality, waning consumer enthusiasm persisted, a spike in fuel and commodity prices and the disruptions in Japan.

Emerging markets fared better due to lower saturation rates, but also slowed somewhat with Asia-Pacific (excluding Japan) slowing to a 5.6% growth and China continuing to cool off after a momentous 2010, the firm said.

“‘Good-enough computing’ has become a firm reality, exemplified first by Mini Notebooks and now Media Tablets,” said Jay Chou, senior research analyst at IDC. ”Macroeconomic forces can explain some of the ebb and flow of the PC business, but the real question PC vendors have to think hard about is how to enable a compelling user experience that can justify spending on the added horsepower.”

• HP (HPQ) declined 2.8% compared to the first quarter of 2010, outperforming most markets by taking advantage of surging demand in Latin America. But it struggled in Asia-Pacific (excluding Japan).

• Dell (DELL) had lackluster demand in the U.S. and other key markets, but it made significant strides in emerging markets. Dell slightly outperformed the market with volume declining at 1.8%.

• Acer was affected by continued turbulence in EMEA, its biggest market. It is feeling the pullback in the mini notebook and consumer space. In the U.S., Acer also ceded its place to Apple (AAPL).

• Lenovo significantly outperformed the market, posting 16.3% growth. It continued to dominate Asia-Pacific. Both its desktop and portable PCs grew in double digits compared to the same quarter in 2010.

• Toshiba finished the first quarter with 3.8% growth, helped by a lack of exposure to mini notebooks. Solid gains were reported in all markets except EMEA.

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Cowen & Co. analyst Matthew Hoffman today initiates coverage of Dell (DELL) with a Neutral rating, writing that the stock, at 9 times forward earnings estimates, and 5.7 projected free cash flow, is about fairly valued, given the likelihood that the company’s revenue will and operating cash flow will struggle under the weight of increasing tablet computer competition.

Hoffman raised his estimates for tablet computer sales, seeing greater cannibalization of PCs than he had previously projected.

We are  increasing calendar ’11 tablet revenue to $32B (from $31B); cutting calendar ’11 PC units to 356MM (just +1% y/y) from 399MM (+11% y/y); cutting calendar ’11 PC revenue to $237B (+0% y/y) from $255B (+6% y/y); increasing calendar ’12 tablet units to 91MM (+77% y/y) from 82MM (+59% y/y) units; and increasing calendar ’12 tablet revenue to $58B (+81% y/y) from $44B (+42%) previously.

Ans so tablets will make up 20% of 2012′s computing market, up from a prior 15% estimate.

Dell is likely to basically sit out much of the action, he thinks, until late next year when Microsoft’s (MSFT) Windows 8 arrives. What that means is that Dell will maintain 14% of the global PC market, but of a market that’s shrinking, meaning Dell’s PC revenue, which is 50% of sales, will decline 1% per year, compounded, in 2012 and 2013.

That leads Hoffman to estimates for Dell dramatically below consensus, at $62.6 billion in revenue for the year ending next January, and $1.68 in EPS, versus consensus of $64.76 billion and $1.70. While Dell should still experience decent growth in its IT services and enterprise products lines of business (servers, etc.), it won’t be enough to offset the tablet erosion of the PC market, he thinks.

Dell may still generate healthy cash flow of $2.5 billion per year, he notes.

But the question is whether Dell, in order to become more aggressive in tablets, will spend more heavily to develop technology it needs. That would threaten earnings, he notes.

Meantime, Dell today said it would open a new facility in Santa Clara, in California’s Silicon Valley, where the company plans to employ up to 1,500 staff within the course of the next five years. The facility will help Dell consolidate several teams that have come to the company from its acquisitions of startups in the Valley, it said. They include Everdream, Ocarina, Zing, and Scalent.

Dell shares today are up 29 cents, or 2%, at $14.54.

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Bloomberg’s Mark Lee and Janet Ong this afternoon provide an overview of a week that has seen a 22% drop in Acer‘s (TW.2353) stock price and the departure of CEO Gianfranco Lanci yesterday.

Acer shares traded in Taiwan fell another 5% today to 57.10 New Taiwan dollars. The rout started Monday, following Acer’s disclosure a week ago that Q1 revenue and Q2 unit shipments will be lower than the company had expected.

Lanci made the mistake, as far as the board was concerned, of going after Hewlett-Packard (HPQ) and Dell (DELL) with cheap PCs and Netbooks, rather than target Apple (AAPL) with more innovative products, the authors write.

Acer chairman J.T. Wang will take over CEO duties while the company searches for a replacement.

Lee and Ong cite analysts who say that it will be challenging for the company to overcome its legacy as a low-cost computer maker and innovate, something that is going to drive up R&D expenses.

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Shares of Dell (DELL) are down 24 cents, or 1.6%, at $14.53, after Needham & Co.’s Richard Kugele this morning cut the stock to Hold from Buy, arguing that the stock will be “range-bound over the next few quarters,” and that the company is “a paradox.”

On the one hand, Dell has a good corporate PC and notebook business, it will likely benefit from IT spending this year, it’s an “emerging force in data center server and services,” and the stock is cheap.

However, Dell also has a portfolio for “cloud” computing that lags that of Hewlett-Packard (HPQ), and it has a “fairly weak set of consumer offerings to address smartphones and tablets that could impact growth.”

Within that paradox, what tipped the balance, apparently, for Kugele, is his belief that component shortages are set to emerge a result of Japan’s disaster, and that as a result prices for DRAM and LCD displays are likely to rise, crimping Dell’s margins. As a result of that new negative factor, risk and reward are balanced in the stock.

Kugele cut his estimates for this fiscal year ending in January of 2012 to $64.87 billion in revenue, but maintained his $1.63 EPS estimate. Kugele thinks his EPS number had already taken into account less favorable pricing, while the Street’s $1.70 consensus is too optimistic.

Dell’s not the only one getting knocked today on the components issue: Jefferies & Co. expressed caution regarding Apple’s next quarter, on that score, as did Pacific Crest yesterday.

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