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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: rudedog who wrote (91091)	5/3/2001 3:53:23 PM
From: tonyt	Read Replies (1) \| Respond to of 97611

RESEARCH ALERT-UBS Warburg cuts Dell on price war concerns NEW YORK, May 3 (Reuters) - UBS Warburg on Thursday cut its rating and earnings estimates for Dell Computer Corp. (NASDAQ:DELL) on concerns about the No. 1 personal computer maker's aggressive pricing strategy. Analyst Don Young said he cut rating on the stock to buy from strong buy and his earnings per share estimate for the second quarter to 74 cents from 83 cents. "We remain concerned about Dell's continued price aggression and we lack confidence that the PC (personal computer) industry's sacrifice of short-term profitability will lead to long-term gains," Young said. "On the pricing front, we eventually expect Gateway (Inc. (NYSE:GTW)) to become more aggressive, and we understand Compaq is now matching Dell's pricing," Young said. "We are also hearing more about further streamlining and expense reductions at Dell confirming our belief that Dell is continuing to prepare for a drawn-out price war," he said. "We think current operating margins of between 6-7 percent could fall another 300 basis points." "We are not sure that the sacrifice of short-term profitability will result in long-term gains -- as we do not buy into the thesis that this price war will drive consolidation toward a more desirable industry structure," Young said. "In fact, the industry has seen nothing but consolidation for the last 10 years and profitability has continued to decline." "Initially we thought Dell got a jump on the competition with aggressive pricing late last year and expected the momentum to carry the company through the April quarter," he said. "Now we are not sure Dell made it through the April quarter without serious competitive price responses." Dell shares were off $1.98, or more than 7 percent, at $24.75 in heavy afternoon trading on Nasdaq. Copyright 2001, Reuters News Service