Mohan: I just picked this up on the Yahoo Finance DELL thread. I think the author claimed it was from BusinessWeek Online. Enjoy:
<<With Dell Down, Is It Time for
You to Jump In?
Sure looks like it could be. The stock is down 26% from its
Feb. 2 high of 110: It closed on Feb. 17 at 81 9/16, a
decline of 7 3/16 for the day.
The reason for the sharp, shall we say, correction, goes
beyond the disappointing news in Dell's Feb. 16 release
of fourth-quarter earnings. Profits for the PC maker
were in line with consensus analysts' estimates of 31
cents a share, vs. 20 cents a year earlier. But the
company has a history going back 16 quarters in a row
of beating analysts' estimates pretty handily, says Chuck
Hill, director of research at First Call Corp., which
tracks corporate earnings. "Matching the estimates
wasn't good enough" for investors, he says.
Slowing revenue growth was the real problem in the
release. Dell's quarterly revenues totaled $5.17 billion, a
38% increase over the prior year. But some analysts
expected Dell to report $200 million more, or a 45%
revenue gain. "They faced very stiff pricing competition
on the corporate desktop segment of the market," says
Megan Graham-Hackett, an analyst with Standard &
Poor's equity research group, who is maintaining her
strong buy recommendation on Dell. In addition,
corporate customers delayed some orders from Dell's
fiscal fourth quarter (ended Jan. 29) into its 2000 fiscal
year, she says.
DELL'S LIMITS. One explanation for Dell's sudden
nosedive is that the market has overreacted. But maybe
all those disappointed investors aren't quite as spoiled
as they seem. The real lesson in Dell's fall from the
superhuman to the merely mortal could be that the
company is approaching the inevitable point where
investors' expectations are exceeding Dell's ability to
deliver. "It is not a fracturing of the business model,"
says Ashok Kumar, an analyst with Piper Jaffray, who
concedes that the company has lost some of its
competitive advantage as other computer makers have
copied its direct-sales model. He just thinks investors
will have to get used to revenue growth of 35% to 40%
from here on.
PC PRICING PRESSURE. Wall Street sure isn't
stampeding. Of 31 analysts who cover Dell, only four
downgraded the stock on Feb. 17, and one upgraded
it, says Hill. A few analysts changed their 1999 earnings
estimates for January 2000, but mostly the analysts just
came closer in line. The consensus estimate still calls for
Dell to earn $1.47 a share for its 2000 fiscal year. "On
balance, analysts were somewhat negative," says Hill,
"but it's not like there was a rush for the door."
For instance, Merrill Lynch analyst Steven Milunovich
expects Dell's revenue growth to slow to 40%. But he
thinks its superior business model justifies a stock price
of $92, he wrote in a Feb. 17 report. "I wouldn't want
to be sitting here knocking Dell," adds Robert G.
Morris, who manages Lord Abbett & Co.'s large-cap
value portfolios. "It has arguably been one of the most
successful companies in recent history." ....>>
Hmmmm.....I wouldn't want to bet against Michael..!!!
Sleep Well...
-Scott |
