8/10...Dell Shares Slide Over Revenue Worries
NEW YORK (Reuters) - After a rocky first six months of the year for Dell Computer Corp (NasdaqNM:DELL - news), analysts on Friday forecast a less robust second half for the world's No. 2 personal computer maker and sent its stock tumbling by 10 percent.
``Light sales are likely to cloud the picture'' for Dell for the remainder of fiscal 2001, Chase H&Q analyst Walter Winnitzki said on Friday after Dell's second-quarter earnings report which came late on Thursday.
Dell shares, by far Nasdaq's most active issue on Friday, closed off 4-1/16 at 37-11/16. One of the day's top 20 net losers, the stock fell to within 3 points of its 52-week low of 35. It's high for the period was 59-11/16.
Dell's profit for the quarter, reported after the close of trading on Thursday, came in slightly ahead of most analyst expectations. But the direct seller of PCs reported revenue growth that was shy of most forecasts, largely as a result of weakness in European sales.
Revenue rose 25 percent to $7.7 billion, compared with earlier projections of 30 percent and a historical range of more than 50 percent.
Round Rock, Texas-based Dell said it was positioned to achieve its target of 30 percent growth for the year, but analysts were skeptical.
Donaldson Lufkin & Jenrette's Kevin McCarthy said in a note that he had cut his revenue estimate modestly to $32.75 billion from $33.28 billion, but kept earnings estimates unchanged.
McCarthy said Dell's revenues remain highly dependent on commercial desktop unit shipments in the United States. The move to an Internet computing model is slowing the commercial desktop unit market, which is the source of about half of Dell's revenues.
Bear Stearns analyst Andy Neff said that while results were in line with expectations, there is less ``upside'' opportunity and more risks exist than in the past.
For the second half, Neff said the revenue target will require a pickup in Europe and in government business -- both of which look feasible at this point.
Lehman Brothers analyst Dan Niles was more optimistic. Niles said he expects the second quarter to have been the bottom in revenue growth year-over-year and growth should accelerate back into the high 30 percent range by the end of the year.
As for Dell's stock, the analysts agreed that it is likely to remain in a limited range until the company can restore its traditional top-line growth.
``Near-term appreciation will be held back until sales momentum returns,'' said Chase H&Q's Winnitzki, although he kept his rating on the stock at buy.
DLJ's McCarthy said he expects Dell's stock to stay in its recent $38-58 trading range as it transforms itself into an enterprise supplier, which most analysts see as the company's most important long-term area of opportunity.
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