"i think [dell] copied Apple."
still a great company, in my view, but stock price may be weak for a while.
regards
Round Rock, Texas, Oct. 18 (Bloomberg) -- Dell Computer Corp., the No. 1 direct seller of personal computers, said a rise in memory-chip prices caused by last month's earthquake in Taiwan will cut into fiscal third-quarter earnings, sparking a drop in Dell's shares.
Taiwan is the source of many PC parts, including dynamic random access memories, the most common memory chips in PCs. Dell said it will put fewer DRAMs in PCs to try to cope with the price increases, which have been fueled both by strong PC demand and by the earthquake. Customers will pay more for Dell PCs if they want machines with more memory, Dell said.
Dell's warning is a turnabout from its previous comments on the Taiwan earthquake. Chairman and founder Michael Dell told analysts at a meeting Oct. 7 that he didn't see any need for them to change earnings forecasts because of it. Memory prices have risen much more since the meeting, making the warning necessary, Dell executives said on a conference call today. ``There is a shortage out there,' said Nathan Brookwood, an analyst at semiconductor consulting firm Insight 64 in Saratoga, California. ``DRAM supplies are tight.'
Dell shares fell 1 1/2 to 41 5/16 in regular trading. They fell as low as 37 9/16 on electronic networks and regional exchanges after the 4 p.m. New York close of trading on the Nasdaq Stock Market, according to Instinet. Dell held its call after markets closed.
Higher memory-chip prices will add about $75 to the cost of making a computer, Dell said. Its average machine sells for about $2,200. Its lowest-priced machines goes for about $800. ``It's not our intent to drive prices higher,' said T.R. Reid, a spokesman for Round Rock, Texas-based Dell.
Forecasts
Dell executives declined to say how much earnings will be hurt by higher DRAM prices. The company was expected to earn 20 cents a share in the quarter ending this month, the average estimate of analysts polled by First Call Corp. Dell earned $384 million, or a split-adjusted 14 cents, in the year-ago period. ``A surprising increase in DRAM prices will hurt us in the third quarter,' Dell Chief Financial Officer Tom Meredith said.
Meredith said Dell's sales are rising, and that revenue growth this quarter will be in line with the first half of the fiscal year, when sales rose more than 40 percent.
Spot-market prices for some 64-megabit DRAM chips rose to about $21 after the quake from about $15 before it. They have since returned to around $15, according to chip broker American IC Exchange. Contract prices, negotiated between big buyers and sellers, are still high, according to Dell.
DRAM prices were rising even before the earthquake. Some 64- megabit DRAMs were selling for about $4.50 in July. Rising sales of PCs using greater amounts of memory fueled the increase.
Latest Warning
Dell joins several rivals that are having problems because of the Taiwan earthquake. Hewlett-Packard Co. said sales will fall short of some analysts' forecasts in the current quarter because the quake shut down suppliers. Compaq Computer Corp. said some of its computer shipments to retailers are delayed.
Taiwan, where many electronics manufacturers have plants, was hit by a quake last month that killed at least 2,100 people, injured around 9,000 and caused widespread power failures.
Shares of the Round Rock, Texas, company have risen just 13 percent this year, after more than tripling in value in 1998.
¸1999 Bloomberg L.P. |
