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

To: Sam Bose who wrote (152254)	1/26/2000 9:37:00 PM
From: Sam Bose	Read Replies (1) \| Respond to of 176387

More Analysis of DELL Warning: Second Time is No Charm..... So much for the one-time-event theory. For the second time in as many quarters, Dell (DELL:Nasdaq - news) Wednesday said its earnings would fall short of analysts' consensus estimates. The company said after Wednesday's close it would report fourth-quarter net income of $430 million, or 16 cents a share, missing the consensus by a full nickel. Its stock fell in after-hours trading, slipping 2 3/4 to 37 5/8. The big question now is how the Street will react to the news. On the one hand, this is a pretty severe miss, the worst in Dell's history, perhaps casting doubt on the company's comments last quarter that the third-quarter culprits -- higher-than-expected memory prices due to Taiwan-related snags -- were one-time in nature. This shortfall also appears more severe than the previous one: In its third quarter ended Oct. 27, Dell reported earnings of 18 cents a share, 2 cents below estimates. On the other hand, the market bought the one-time story then, pushing the stock down just a few points, and a warning from fellow PC seller Gateway (GTW:NYSE - news) barely dented the stock's advance. Thursday will tell. One Time Only For bulls' sake, Dell's got another one-time argument now: It couldn't get key chip components and the Y2K lockdown hurt corporate sales. Gateway used the same argument when it warned Jan. 5 that it wouldn't meet fourth-quarter earnings estimates, and the Street bit: Its stock is up 5% since. Dell is set to report earnings Feb. 10. After a mostly flat 1999, Dell's stock actually made a strong move up to the low 50s in December, seeming to move beyond the problems it experienced in the third quarter. The run-up late in the year made Dell investors optimistic that the company could turn in a strong 2000, after a weak-by-its-standard 1999 that saw the stock, for the first time in memory, lag major market averages. Analysts such as Piper Jaffray's Ashok Kumar were calling for 2000 to be the year of Dell, and money managers were excited by the chance to get into Dell at 40. (Kumar has a buy on Dell, and his firm has done no underwriting for the company.) Slow Death? But soon after New Year's, that all changed. When Gateway warned in early January, Dell's stock fell like a B2C play; it's down 16% since. The fact that Dell has missed for the second time in a row may give investors more pause than in Gateway's case, as well. "This was the most-advertised miss I've seen in a long time," says Jeff Matthews, a money manager with Ram Partners. "The whisper numbers were going down, not up." Matthews, who's short Dell, argues that this is just one more signal that the PC business is going out of style. "I think the overall mosaic with Dell, Compaq (CPQ:NYSE - news) and Gateway is that the PC business is becoming less relevant, if not irrelevant. This could be a slow death." Slow Life? Nonetheless, Dell investors may decide not to slap Dell too hard for its transgressions. The company's stock is still relatively undervalued, considering analysts expect Dell to show 38% year-over-year revenue growth and 28% earnings growth for its 2000 fiscal year, which ends Friday. For its next fiscal year, Dell CFO Tom Meredith told analysts to expect annual revenue growth in the low-30% range. "I think this is a buying opportunity," says Mark Specker, an analyst with SoundView Technology Group. (Specker has a buy rating on Dell, and his firm has done no underwriting for the company.) "This was somewhat anticipated, and I think Dell will begin to ramp a little again after an initial fall tonight."