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To: etchmeister who wrote (1222)	9/20/2006 4:03:56 PM
From: niek	Read Replies (2) \| Respond to of 42854

re: remember not so long ago (4 months or so) everybody was 'harping" on PC weakness? IC designers expect strong PC market in 4Q I sure do Etch. But how about this one? AP Dell May Warn of Shortfall, Says Analyst Wednesday September 20, 12:00 pm ET ThinkEquity Analyst Says Dell May Again Warn of Profit Shortfall in Third Quarter NEW YORK (AP) -- Dell Inc., the world's largest PC maker, may again preannounce a negative quarter, likely in mid-October, said a ThinkEquity analyst on Wednesday. In a note to clients, ThinkEquity analyst Eric Ross, who has a "Sell" rating on Dell, said he heard from "several members of the PC supply chain" in Asia that Dell's PC units and profitability are "declining rapidly below expectations." Dell preannounced a significant profit shortfall in its previous quarter, blaming falling prices and a slowing personal computer market. The PC market will likely continue to struggle, Ross said. "We have heard PC makers believe 2H06 is much flatter than they previously expected. With 62 percent of revenue coming from PCs, Dell is heavily affected by this slowdown," Ross wrote in a note to investors. Dell's competitors, such as main rival Hewlett-Packard Co., derive a smaller fraction of their revenue from PC sales, making them less vulnerable to the lackluster computer market. Although the third quarter is only half over, the analyst said it will be very difficult for Dell to make up the declines seen so far. "In our opinion, the company is in a near-impossible situation," Ross wrote, adding that Dell must either keep its prices low or continue to lose market share to rivals selling at lower prices. "Competitors are driving gains based on price, and the Asian market is largely a price-driven market," he adds. The analyst also said he expects rival chip maker Intel Corp. to "drastically lower" its marketing budget to Dell, from several hundred million dollars to essentially zero. Among Ross' laundry list of problems faced by Round Rock, Texas-based Dell is a "management team clearly in disarray with factions fighting for power," as well as a loss of key employees to major competitors, such as Lenovo. Dell's shares slipped 17 cents to $21.44 in midday trading on the Nasdaq. The stock hit a five-year low of $18.95 in July, when it warned of its second-quarter profit shortfall.