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

To: Sam Bose who wrote (152513)	1/28/2000 11:33:00 AM
From: stockman_scott	Read Replies (1) \| Respond to of 176387

Were Dell's warnings a tempest in a teapot? By Tom Davey Redherring.com January 28, 2000 <<With Dell Computer (Nasdaq: DELL), one afternoon the sky is falling, but look up the next morning and you see nothing but blue. Dell caused a ripple of panic throughout the computer sector Wednesday when it disclosed that earnings and revenues would fall far short of analysts' expectations. On Thursday, Wall Street analysts upgraded their rating of the computer maker, its shares rising on the news. Dell, whose fourth quarter ends January 28, warned that deferred purchases because of Y2K concerns, and a chip shortage from Intel (Nasdaq: INTC), would result in earnings of 16 cents a diluted share versus analysts' consensus estimates of 21 cents. That's 24 percent off the mark. Dell plans to announce its earnings on February 10. Various publications, including the Wall Street Journal, quoted industry pundits that hard times are headed for the PC hardware industry, especially for Dell. But those stories appeared Wednesday night for Thursday's papers. Dell's stock bottomed out Wednesday evening at $36 a share in after-hours trading. What a difference a day makes. Thursday morning, several analysts upgraded their ratings on Dell. They included Ashok Kumar of US Bancorp Piper Jaffray (Nasdaq: UBAN), Steve Fortuna of Merrill Lynch (NYSE: MER), and Dan Niles of Robertson Stephens. DELL BARELY FELL Although dipping from Wednesday's close, Dell's stock rose to $38 in Thursday after-hours trading, according to The Island. Other hardware stocks showed mixed results that were comparable to the market as a whole. And none of them had a disastrous day. Some analysts think Dell is being overly conservative in its projections. "All of last year, Dell lagged the market," says Mr. Kumar, who upgraded Dell from a Buy to a Strong Buy. Mr. Kumar believes Dell is taking a hint from companies such as Microsoft (Nasdaq: MSFT) and Intel, who seem intentionally to understate their earnings guidance to analysts for the sake of a positive surprise. Mr. Kumar says Dell's new projected growth percentages in the lower 30s for the coming year are too low. He's expecting a 35 percent jump in earnings, which would give Dell a price/earnings ratio for next year that's just barely higher than the growth rate. "Windows 2000 comes out in February, and some companies are not upgrading before then," says DA Davidson analyst Mart Corcoran, describing the potential surge in demand for PCs from business customers. Mr. Corcoran, who maintains a Buy rating on Dell, agrees with Mr. Kumar that Dell still is priced right for a significant upside. "Other hardware companies are trading at two or three times their earnings multiples," he says. ULTERIOR MOTIVES Of course, financial analysts might have ulterior motives for boosting ratings as a business declines. "The job of an analyst is to turn your customers' assets into commission dollars," David Wu, analyst with ABN Amro, says sarcastically. "We expect PC makers to see their margins squeezed by the component makers." Mr. Wu needs a disclaimer for his comment. Until last year, he followed the PC makers. But now he's dropped that coverage and instead keeps tabs on chip companies, including those selling microprocessors and memory chips, which are PC components.>>