To throw more egg on Dell’s face, competitors Apple (AAPL) and HP (HPQ) both beat out expectations for second quarter profits. What’s wrong? Experts say that Dell is too focused on PC’s, whereas Apple and HP have a wide arrange of other offerings such as the Apple iPod and HP’s renowned printers. Because there is not a lot to differentiate a Dell PC from the competition, price is really the only area Dell can try to compete in. The price war is paying a toll on operating profit margins which fell 0.8% from a year ago. Also, a lot of the drop in profits for Dell is happening overseas. International prices for laptops have dropped considerably recently, and corporate IT budgets at international companies have also been dropping.

Not all is bad at HP, however. Worldwide shipments rose more than 6 percentage points more than industry-wide growth. Also, promotional spending is starting to pay off for Dell. Their margins were squeezed by the spending, but their products are getting on the shelves and quickly being picked up by consumers. Consumer sales grew 28% in the second quarter and is now up to $2.7 billion, accounting for 17% of Dell’s total revenues.

The main question for investors should be: Can Dell compete with other PC leaders HP and Apple? I say that it is too early to tell. This past quarters low margins come after heavy investment in building brand for the consumer market. Like everyone else, I’d like to see Dell diversify more and differentiate themselves, but if their current strategy works and they are able to lock in more of the consumer market, then they will be in a more comfortable place.