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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: freeus who wrote (144893)	10/18/1999 8:12:00 PM
From: stockman_scott	Read Replies (1) \| Respond to of 176387

...Dell Says Memory-Chip Prices to Hurt 3rd-Qtr Earnings..An Update....FYI... <<Round Rock, Texas, Oct. 18 (Bloomberg) -- Dell Computer Corp., the No. 1 direct seller of personal computers, said higher prices for memory chips in the wake of last month's earthquake in Taiwan will cut into earnings in its fiscal third quarter. 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. ''A surprising increase in DRAM prices will hurt us in the third quarter,'' Dell Chief Financial Officer Tom Meredith said. 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 a share, in the year- earlier period. ''You're going to have to do the calculations,'' Meredith said when asked by an analyst to be more specific. 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. 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. 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. Shares of the Round Rock, Texas, company have risen just 13 percent this year, after more than tripling in value in 1998. Oct/18/1999 19:44 >> ---------------------------------------------------------------------------------------------- Some thoughts-- A number of us have had to learn that it is OK to love a company but painful to fall in love with a stock. A few weeks ago I sold all my NETP and a large portion of my DELL (at $46). I did this since I wanted to eliminate ALL of my margin balance and take care of some other obligations. DELL as a company is performing well. Yet, they are very large and require a lot of components. DELL has no control over things like earthquakes -- and they now are impacting the supply chain for a key component. We know that DELL has excellent management and a finely tuned business model. Yet, the stock will be under pressure for a little while. Other large blue chip tech stocks have warned and re-bounded in a significant way. I believe Intel is a classic example. IMO, it makes sense to be prudently diversified. I still admire what DELL has accomplished as a company. Yet, this year it HAS NOT delivered a shareholder performance like some of the high flyers -- such as SUNW and QCOM. I look forward to the days when DELL will set new highs. The expectations game can be difficult. It is important to look at how a company and a sector are perceived in the marketplace. I have started to do this in 1999 and have done well with my online IRA -- in spite of the turbulent markets. At the end of last week I was still up over 75% YTD....and I had almost 1/2 dozen holdings. I think DELL could perform very well in 2000 and I may re-build my position. Right now DELL is my smallest holding BUT it's still my favorite company <VBG>. Good Luck Investing. Best Regards, Scott