Jim..I think your analysis simplified the issue a bit too much..
Dell held an analyst meeting around October 10th......during the meeting, they gave "assurances" that, although their quarter was going to be impacted (by the Taiwanese earthquake)...that they were going to make it....at least, that's what many of the long-time bulls (Kwantinez, others) believed...Then, approximately 10 days later, came the warning...the issue...which I don't think is a question of integrity....I believe Dell's management BELIEVED that they could make the quarter (even though it was going to be close), and they were caught off-guard by the spike......The issue is: Their business (PCs) is an extremely difficult one...and the real question is a matter of reliability....Dell's management gave the impression that everything was under control..and only 10 days later, had to do a complete reversal...it is a matter, if you will, of "execution" of communication...and, at the analyst meeting, Dell obviously did not downplay (enough) prospects for the quarter...leaving some room for error (which they, ultimately, needed)..They "executed" very poorly (in that particular case)....The Street, as you know, HATES (bad) surprises.......
Ironically, that is probably why Dell is not coming out stronger in the press right now (and putting the full-press to refute allegations)...Still 30% or more (estimate) of booked business to go...and the quarter is not a sure thing yet, despite the great Intel news...........(Dell's) management probably does not want (any) possibility of what happened last quarter (even if remote) to happen again...I think we all agree that that would be viewed horribly.....and that possibility would be worse (certainly) than saying nothing now (even if things look bright...and having the good results come out later)...even if the stock takes a near-term hit...
In July, I was not willing to give creedence to Edamo's point about Dell "the stock"...since the stock P/E were still high..and the stock had not been moribund for that long...now, I would agree that MDell needs to come out publicly (more) and talk about how the PC is NOT DEAD...in order to "even" the equation a bit....It is obviously, by the numbers, that PC's are still be sold at a rapid rate...but the PR battle among the investment community has been (somewhat) lost apparently....Against all available information, investors WANT to believe that PCs are dead now (wrongly)
I do strongly think, despite the slip-up in October, Dell (the stock) has been overly punished here...given the track record of excellent results, and a bright future.....Look at how forgiving the market has been of Oracle, Intel and others, who, in my estimation, has mis-led (intentionally or not) analysts much, much worse in recent times...the market has been throwing money at any fiber-optic, Linux, etc stock REGARDLESS of their track record........so, in conclusion, the stock WILL recover...but a little good PR in the meantime, never hurt get the ball rolling in the other direction... |
