Jay, is this the report you're referring to??
NEW YORK (Dow Jones)--Merrill Lynch & Co. PC analyst Steven M. Fortuna initiated coverage of the three biggest direct sellers - Dell Computer Corp. (DELL), Gateway Inc. (GTW) and Micron Electronics Inc. (MUEI) - at near-term neutral ratings.
The analyst issued a bearish industry report, calling the PC hardware industry "an industry under siege."
Despite the industry's move to higher-margin products like laptops, servers and workstations, "the influx of low-cost and super low-cost PCs over the next couple of years could have an overwhelmingly depressive effect on average unit prices," Fortuna wrote.
The analyst started Dell at near-term neutral/long-term buy, stating that its shares trade at a "rich valuation" of 53 times forward four-quarter earnings estimates. "We believe the stock's valuation could fall victim to the difficult times that lie ahead for the industry," he wrote.
Fortuna started Gateway at near-term neutral/long-term attractive. The analyst wrote that "at 27 times forward four quarter consensus estimates, we believe the stock is fully valued and discounts a strong" second-half 1999 performance.
Merrill started Micron Electronics at near and long-term neutral. "While investors clearly are awarding the stock a healthy multiple for its turnaround potential, the company faces a series of challenges which we believe could prove insurmountable," he noted.
Fortuna joined Merrill Lynch in June, a spokeswoman said. He followed PC hardware for Deutsche Morgan for three years before that.
The analyst is expected to initiate coverage on more PC stocks soon.
Gateway shares fell 3 1/8, or 3.8%, to 80 1/8. Dell shares fell 1 1/4, or 3%, to 41. And shares of Micron Electronics fell 15/32, or 4.6%, to 9 5/8. - Christopher Grimes (201) 938-5253
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