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To: pater tenebrarum who wrote (24787)	10/5/2000 10:56:34 AM
From: Ilaine	Read Replies (3) \| Respond to of 436258

Weird news of the day: US resolve to prop up Euro linked to Dell woes. >>Thursday October 5 10:29 AM ET Dell Woes Seen Cementing U.S. Euro Resolve By James Saft LONDON (Reuters) - Dell Computer Corp, the latest American company to fall victim to the weak euro, provides strong evidence of why the United States is likely to seek actively to prevent further declines in the single currency. Dell (NasdaqNM:DELL - news) on Wednesday warned that third-quarter sales will be crimped by flagging European demand caused in part by higher prices in the euro zone for imported U.S. goods. Dell's problems are exhibit A of why the U.S. was willing to join its Group of Seven peers in intervening to support the euro last month, analysts said, and why it is likely to do so again if the single currency slumps anew. ``The intervention is very directly connected to issues like Dell,'' said Paul Horne, economist at Schroder Salomon Smith Barney in London. ``The profit warnings of major tech companies over past weeks have contributed to serious concerns about the rapidity of softening of the U.S. economy.'' The European Central Bank on Thursday followed up the intervention with a 25 basis point interest rate hike but U.S. policy makers will be more concerned with companies like Dell, whose warning was twinned with one on similar lines by mail machine company Pitney Bowes (NYSE:PBI - news). ``There has been some macro-psychology at play with the weak euro,'' said Chairman and Chief Executive Michael Dell, speaking to analysts at a meeting in Austin, Texas. ``People (in Europe) have been significantly less inclined to make expenditures in terms of technology.'' The danger for the United States is that a gentle slowdown in economic growth is nudged into a hard landing as U.S. companies suffer due to diminished competitiveness in Europe. Dell Joins Euro Woes Club Dell is not the first U.S. corporate to lay the blame for poor sales at the euro's feet. Chip giant Intel Corp. (NasdaqNM:INTC - news) and personal computer maker Apple Computer Inc. (NasdaqNM:AAPL - news) both said recently they saw slack sales in Europe. Photographic film maker Kodak (NYSE:EK - news) also blamed dollar strength for a recent profits warning. This litany has bruised the tech heavy Nasdaq index, which has shed nearly 20 percent of its value since September 1. This, in turn, could translate into diminished consumer and corporate spending, analysts said Dell's news is especially troubling for corporate America because, unlike Apple and Intel, a major portion of its revenues come from corporate sales, indicating that the weak euro is affecting capital expenditure plans by European companies. In theory, analysts said, this leaves a wider range of U.S. firms which sell to corporate Europe vulnerable. ``One could argue that a strong dollar has become too much of a good thing,'' said Paul Meggyesi, senior currency strategist at Deutsche Bank in London. ``The benefits in terms of low inflation are increasingly being outweighed by the negative aspects in terms of U.S. ability to compete in overseas markets.'' But, Meggyesi said, the U.S. is unlikely to want to see the dollar fall fast and hard, as that would spur inflation and could spiral out of control. ``I see intervention perhaps on further weakness but not if it is trendless as it now seems to be,'' he said. WEAK EURO OR WEAK EUROPEAN DEMAND? But not all observers agree that a stronger euro relative to the dollar will solve the problems of U.S. companies seeking to sell into the euro zone. James Montier, strategist at Old Mutual Secutities in London, said that the real issue is Europe's appetite for goods and services, rather than the higher cost of dollar-produced goods and services. ``There is demand weakness in Europe and that is becoming apparent from a number of areas,'' he said. ``The only way Europe tends to recover is by an export-led recovery and for that to happen you need to have a weak euro in the first place.''<< dailynews.yahoo.com