Mohan, appears that Ashok "up the market with a call right before earnings" Kumar was talking down DELL today (Not really a surprise. I mean, c'mon, that's this guy's whole game isn't it? Grandstanding close to major tech earnings reports?)
Appears to be the same type of "research" he disseminated right before CPQ's earnings (strange how his call drove CPQ down over 2 pts., they report a slight upside surprise, and now they're roughly about 20% higher from that day's low isn't it?) and the IT spending "macro-level call" right before IBM/MSFT earnings (strange how some newswires attributed the tech sell-off that afternoon to that call, coming hours before the two biggest names in IT report upside surprises, and the hardware sector's been going gangbusters ever since isn't it?)
news.com
Piper Jaffray Inc. analyst Ashok Kumar said in a report to
investors today that Dell's unit shipments of desktop PCs rose
7.6 percent in third quarter ended Sept. 30 from the second
quarter. That's less than the 9.6 percent growth rate for the
industry during the same period, he said.
And DELL's Q ends when? September 30th or November 1st? So, in calling the third Q "ended in Sept.", isn't there a month of suspect data in there (for DELL, July) and one missing (for DELL, October)?
Also, since Kumar has chose to focus on sequential Q's, was there anything going on in 2Q v. 3Q that would account for any discrepancy; say, for example, the channel digesting inventory in the 2Q and then having it rebuilt in the 3Q? Are these unit shipments to the channel?
If Kumar's estimates are correct, it would be the first time
in many years that Dell has increased sales more slowly than the
overall desktop PC industry, which accounts for two-thirds of its
sales.
Do "unit shipments" = sales to consumers?
Year-over-year v. sequential comparisons?
''They are slowing down,'' Kumar said. ''It's alarming.''
Then why did you feel confident enough to keep your strong buy rating? I'd assume that when you put a "strong buy" rating on a report, you're telling people "go out and buy it". Correct?
Dell's unit shipments are slowing because its big customers
are ''saturated'' with Dell equipment, Kumar said.
The evidence for this is what?
Would a concept known as "expanding market share" perhaps be relevant here?
Also, companies are spending more on software and consulting to fix the Year 2000 computer glitch instead of buying new machines.
Which is why Forrester is out there predcting a peak in hardware sales in 1999, not 1998?
Which is why some folks (like ecocomist Ed Yardeni for example) are theorizing that Y2k may lead to a mini-tech boom?
...Investors shrugged off Kumar's warning and drove Dell shares
up 3 5/16 to 69, a record close and just shy of the 69 1/4
intraday high set Sept. 29.
''You can't draw conclusions that things are slowing until
they report'' earnings, said Curt Rohrman, a portfolio manager
for USAA Investment Management Co. in San Antonio, whose company
owned more than 466,000 Dell shares as of June 30.
...Not everyone agrees with him.
Bear Stearns analyst Andrew Neff downplayed the possible dip
in unit sales from the second quarter to the third.
''Year-over-year, Dell's growing at four times the market
rate,'' said Neff, who rates Dell ''buy.''
U.S. PC shipments rose 14 percent in the third quarter from
the year-earlier period, according to IDC. Dell's U.S. shipments
jumped 65 percent during the same period.
And according to a Reuters piece, Europe grew 23.4% year-over-year v. DELL's 86% growth in the region.
Estimates for overall market sales may be inflated because
Dell rivals such as Compaq Computer Corp. cleared out excess
inventory in the first half of the year, affecting growth rates
in the second and third quarters, Neff said.
Thank you.
...Kumar has been a fan of Dell for many years. He's had a
''strong buy'' on it since he started covering the company for
Piper Jaffray in April. He also had ''buy'' ratings on it at
Southcoast Capital Corp. in Austin, where he worked for more than
two years before going to Piper Jaffray in Minneapolis.
Though Piper Jaffray doesn't carry the clout of larger
firms, investors listen to Kumar because he spent about three
years working in engineering and marketing at Intel Corp., which
makes the chips that power Dell's computers.
Uh...um...no. IMHO, investors "listen" to him because he's incredibly astutue at using the media to create his own self-mythology. The media bites the hook on his pre-earnings buzz calls everytime. Case in point - this particular piece.
Kumar also has a Master of Business Administration degree
from the Wharton School of the University of Pennsylvania, which
gives him more cachet in the analyst world, as well as a master's
in electrical engineering from Purdue University.
Stop the presses! Let's run a front page headline in the WSJ tomorrow that reads "Wharton M.B.A. Discovered Working At Investment Bank".
Hey Ashok, why don't you tell these journalists that you were also a member of the Anvil Club? (inside joke <g>)
Kumar said Dell shares may have risen in the face of his
negative report today because investors are very optimistic about
technology stocks right now.
Finally, a logically sound syllogism.
With its high P/E, Dell could be particularly vulnerable if
its growth rates slow, Kumar said. ''When the music stops, it's
not going to look pretty,'' he said.
When hasn't this statement been true?
Good trading,
Tom |
