Tradegod , thanks for the clarification on the DELL rumors. So far, at least, they are still rumors, but they are spreading fast.
There was a posting on the WDC thread yesterday that seems to be part of the DELL warning. The poster said there was a rumor that CPQ was delaying orders. James Cramer of thestreet.com said a Wall Street analyst denied the truth of the rumor.
This morning CNBC was reporting rumors that DELL might miss its numbers this quarter, and DELL was expected to be one of today's losers.
And the news wires are spreading the rumors. Below are three articles from today's Dow Jones on the DELL rumors:
=================
October 30, 1997 9:23 AM
DOW JONES ONLINE NEWS
BROKERAGES DAMPEN
ENTHUSIASM FOR INTEL,
COMPAQ, DELL
NEW YORK -(Dow Jones)- Shares of technology
companies could be in store for another wild day
Thursday after brokerage firms dampened their
enthusiasm for semiconductor giant Intel Corp., personal
computer market leader Compaq Computer Corp., and
mail-order PC company Dell Computer Corp.
Shares of Intel were expected to open lower after UBS
Securities lowered its investment rating to "hold" from
"buy" and lowered 1998 earnings estimates. UBS
reportedly cited Intel's exposure to turmoil in Asian
markets and deeper-than-expected price cuts
announced Wednesday.
BT Alex. Brown downgraded Dell and Compaq to a
"buy" from "strong buy."
Intel is pushing the PC market toward cheaper
machines. Intel Monday slashed prices on some of its
Pentium chips by as much as 40% as part of its regularly
scheduled price cuts. Typically, chip price-cuts are
directly passed along to PC buyers.
Copyright (c) 1997 Dow Jones & Company, Inc.
===============
October 30, 1997 9:26 AM
DOW JONES NEWS SERVICE
TECH STOCKS SEEN
OPENING OFF SHARPLY
NEW YORK (Dow Jones)--Technology stocks are
expected to open sharply lower on follow-through
weakness in overseas markets, concerns about a
restructuring at Silicon Graphics Inc. (SGI) and word of
some investment downgrades and estimate cuts on a few
big players.
"They will be down substantially at the opening," one
trader said.
He added that the technology sector could get a little bit
of a bounce later in the day if "clear heads prevail."
In Reuters Instinet trading, shares of Dell Computer
Corp. (DELL) were trading at as low as 74 1/4. The
stock closed Wednesday at 83 1/2. And Compaq
Computer Corp. (CPQ) was changing hands at 59, after
the stock ended at 63 7/16 Wednesday.
BT Alex. Brown & Sons is said to have lowered its
rating on both stocks to buy from strong buy.
Other active issues include Intel Corp. (INTC), which
was trading at 76 63/64, after ending at 80 1/4
Wednesday.
And Oracle Corp. (ORCL) shares were trading at 33
1/2, after closing Wednesday at 36 1/16.
Silicon Graphics showed little early trading activity
===================
October 30, 1997 3:47 PM
DOW JONES NEWS SERVICE
WALL STREET WONDERS IF
DELL, INTEL ARE CHEAP OR
OVERPRICED
By Christopher Grimes
NEW YORK (Dow Jones)--In a jittery technology
market, even Dell Computer Corp. (DELL) has taken
some hits.
And its stock has stumbled for reasons beyond the
recent decline of the broader markets. For the first time
in a few quarters, investors are beginning to question the
stock price of the high-flying computer company.
There have been rumors - disputed by several analysts -
that Dell has curbed its appetite for computer parts, such
as semiconductors, which led to speculation that orders
for its computers were slowing.
And then there's its share price, which hit a high of 103
7/8 Oct. 16, but has since fallen. It closed at 83 1/2
Wednesday and was recently trading at 80 3/4. Some
analysts say Dell has been particularly hard-hit because
investors were concerned about its valuation - especially
given the chatter that its phenomenal earnings run is
slowing.
So is the stock properly valued right now, or is it cheap?
As with some of the other big technology stocks, the
jury is out on that question. Some analysts are calling
Dell, Compaq Computer Corp. (CPQ) and Intel Corp.
(INTC) bargains at post-skid prices, while others
disagree.
Since Intel supplies chips to about 90% of the world's
PCs, and Dell and Compaq are the darlings of the PC
sector, these companies arguably can be viewed as
barometers of the industry.
David Wu, an analyst at ABN/Amro Chicago Corp.,
maintains a buy rating on Dell and Compaq, both of
which have been clobbered on Wall Street lately in spite
of taking market share from other PC companies this
year.
For Wu, the cheaper share prices of the two PC
companies are attractive.
"Periods of extreme fear are usually a good buying time,"
Wu said of the recent environment.
Dell has been on a seemingly uninterrupted upward run
for much of the year, which Wu said had less to do with
fundamentals and more with investor psychology.
"There was a period when Dell stock was going up $5
every day," Wu said. "That was about as rational as the
current selling."
But Wu's opinion of Intel is different. Although its shares
have declined from 91 13/16 on Oct. 14 - before it
reported its third quarter earnings - to its Wednesday
closing price of 80 1/4, he hesitates to call it a buying
opportunity.
Wu has a hold on Intel, judging that its stock is likely to
drop some more.
Intel forecast a lackluster fourth quarter when it reported
its earnings, and Wu said the share price is likely to fall
more at the end of the fourth quarter. At that point, he
said, Intel will be a bargain.
On the whole, the opinion about Intel is mixed. While
UBS Securities downgraded the stock to hold from buy
Thursday, other analysts say the stock is looking
attractive now.
Some See Dell As A Victim Of Own Success
Dan Niles, an analyst at BancAmerica Robertson
Stephens, has a mirror-image opinion to that of ABN
Amro's Wu when it comes to Intel and Dell.
"Now is a good time to look at Intel stock," he said. Its
forward price-to-earnings ratio is about 19, and he
thinks orders are going to pick up after price cuts go into
effect in November. He has a buy rating on Intel.
In contrast, he said Dell has a future price-to-earnings
ratio of about 25, down from about 30 before the slide
started. He has a long-term-attractive rating on Dell, but
said its shares are pricey right now.
"I think for Dell, the only problem is that to some extent
it is a victim of its own success," Niles said. "We like the
company a lot, but we're not keen on the stock at
current levels."
Niles, like Wu, is recommending Compaq, since its
valuation is lower than Dell's, at about 19 times next
year's earnings. Dell's revenues have been growing at a
significantly faster rate than Compaq, which is the largest
seller of PCs.
Of the rumors that Dell is having to push out its orders
for computer components, several analysts called them
"buncombe."
"We checked with major component suppliers and were
told there was not any change in their order rates nor
have they pushed back any orders," said PaineWebber
analyst Walter Winnitzki.
A Dell spokesman said he couldn't comment on the
rumors because the company has entered its quiet
period going into its Nov. 24 earnings announcement.
Winnitzki said Dell's management has been "upbeat"
going into the quiet period. And, like some of his
counterparts, said much of the pressure on technology
stocks, including Dell's, has to do with hefty multiples.
"I think we're in a situation where tech seems to be more
volatile than the rest of marketplace, and the multiples
have run up to levels that are less forgiving," Winnitzki
said.
In another down day for tech stocks, shares of Intel,
Dell and Compaq sank. UBS lowered its rating on Intel
to hold from buy, citing sluggish chip demand. BT Alex
Brown lowered ratings on Compaq and Dell to buy
from strong buy.
Dell, the most actively traded stock on the Nasdaq
exchange, recently was down 4 1/2, or 5.4%, to 79 on
volume of 24 million shares. Intel stock fell 4 1/4, or
5.3%, to 76 3/16, and Compaq fell 2 3/16, or 3.4%, at
61 1/4. |
