Did anyone see this weeks BARRONS? Alan Abelson column has this to say about DELL:
"We got a call last week from an awfully smart hedge-fund manager we know who specializes in tech stocks and who loves them, but isn't afraid to leave them or, for that matter , sell them short. What prompted the call, our friend explained, were the PC companies, the cutthroat price cutting in the industry and the enormous valuations awarded thier stocks. It was eerily reminiscent of a Robertson Stephens semiconductor conference in July 1995, when the attendees, Street and industry alike, were wildly bullish and the chip stocks were zooming to all-time highs, even as chip prices were dropping like stones.
Our canny pro was especially exercised by Gateway's second-quarter results: unit volume up 31%, sales up 22%, earnings up 10%. That spells two words: margin squeeze. Moreover, Gateway, which heretofore has concentrated on the consumer market, is now going after the corporate buyer that has been the province of Dell, Compaq, Hewlett-Packard and IBM. Which means, clearly, even more ferocious price cutting and margin destruction in the months ahead.
The market woke up to the implications on Friday and roughed up Dell and Compaq(the former was down 7, the latter more than 5). But if this is the start of even a subdued replay of the chip episode, there's still oodles and oodles of room on the downside for the PC stocks. Micron, remember, was in the 90's when all the hooting and hollering was going on two years ago at that Robertson Stephens get-together; once it hit the skids, it never looked back until it hit the teens." |
