Analyst Shaw Wu is maintaining a neutral position on Dell in his periodic research notes due to the recent erosion of gross margins. The reason: poor procurement execution. Mr. Wu believes the unthinkable has now happened: Dellis component costs may now be higher than Hewlett-Packardis and Appleis.

The two key paragraphs from Mr. Wuis notes tell the story:

• Most confusing and controversial was the gross margin, which came in at 18.5%, down 150 basis points Q/Q from 20% (consensus ~19.1%), despite a favorable mix shift towards notebooks. DELL cited a tougher component pricing environment. We find this odd as AAPL and HPQ experienced the opposite and our own supply chain checks indicate otherwise.

• Moreover, DELLis ASPs [Average Selling Price] were flat to up, indicating pricing pressure wasnit a big issue. We believe poor procurement execution was the key reason for the margin erosion. It is interesting to note that DELLis costs may actually now be higher than HPQ and AAPL, something that was unthinkable not that long ago.

Some analysts have pointed to Appleis cash on hand as a factor in obtaining favorable pricing from component suppliers. This provides a credible explanation for how Apple may have been able to leverage a deep seated financial advantage over Dell and maintain its favorable gross margins.